Oil hovers below $81 as traders mull Fed moves

AP News
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Posted: Oct 22, 2010 4:30 AM
Oil hovers below $81 as traders mull Fed moves

Oil prices hovered below $81 a barrel Friday in Asia as traders mulled the possible effects of anticipated moves by the U.S. Federal Reserve to spur economic growth.

Benchmark oil for December delivery was up 12 cents at $80.67 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract lost $1.98 to settle at $80.56 on Thursday.

Oil has seesawed above $80 this week as investors speculate on possible Fed measures known as quantitative easing, such as buying Treasury bonds to help boost money in circulation and bank lending. The Fed next meets on Nov. 2 and 3.

"This week's price volatility is likely to continue for another week and a half until the Fed meeting provides some clarity regarding the extent of widely expected quantitative easing," Ritterbusch and Associates said.

"We look for a sizable easing effort to likely weaken the dollar and bolster equities and enhance oil's appeal as an inflation hedge or valued asset."

Crude has been boosted this year by strong demand from emerging economies such as China which has offset sluggish consumption in developed countries. Some analysts expect Chinese demand to continue to grow, despite a surprise interest rate hike earlier this week.

"Contrary to market fears, the health of Chinese oil demand remains extremely robust," Barclays Capital said.

In other Nymex trading in November contracts, heating oil rose 0.33 cent to $2.218 a gallon and gasoline gained 0.26 cents to $2.044 a gallon. Natural gas was steady at $3.388 per 1,000 cubic feet.

In London, Brent crude rose 31 cents to $82.15 a barrel on the ICE Futures exchange.