Oil rises to near $107 on fed hopes
BANGKOK – Oil rose to near $107 a barrel today after a disappointing U.S. jobs report made it more likely the Federal Reserve will continue its stimulus program beyond September.
Benchmark crude for September delivery was up 3 cents to $106.97 at late afternoon Bangkok time in electronic trading on the New York Mercantile Exchange. The contract fell 95 cents to close at $106.94 a barrel on Friday.
U.S. employers added 162,000 jobs in July, which was below expectations. The government also revised down gains for the prior two months when it released its employment figures Friday.
Some analysts were expecting the Fed to start reducing its massive economic stimulus program in September. However, the disappointing employment data raised hopes that the Fed might continue its $85 billion a month in government bond purchases until the end of the year.
The bond purchases have pushed down interest rates, which makes money available for spending and investment. But the purchases also inject more dollars into the economy, which lowers their value. That tends to push up the price of oil as it becomes more affordable for investors using other currencies.
“The U.S. dollar weakness generally is positive for risk assets, gold and other commodities. So that will be a good scenario for the markets, if tapering is delayed,” said Stan Shamu, market strategist at IG in Melbourne, Australia.