Light crude oil trading around $71 US, Fed comments

Light crude oil futures in Asia gave up some of their overnight gains Friday but held above $71 a barrel in trading despite a slightly stronger US dollar after comments by Fed Reserve Chairman Ben Bernanke about a possible future tightening of monetary policy.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in November traded at $71.15 a barrel at 0609 GMT, down 54 cents in the Globex electronic session. November Brent crude on London’s ICE Futures exchange fell 57 cents to $69.20 a barrel.

Dollar weakness continues to provide key support to oil in the absence of a fundamental boost and combined with stronger equities pushed Nymex crude up 3.1% in New York overnight.

“Energy prices were stronger Thursday…as further dollar apathy gave way to further commodity exuberance. Not Wednesday’s Department Of Energy report, nor yesterday’s Energy Information Administration report, which were both bearish, could overcome the moribund greenback,” said Stephen Schork in The Schork Report.

Bernanke’s comments aren’t going to change that anytime soon, analysts say.

“It’s still a bit uncertain. Most people don’t expect any monetary tightening action until late next year…the market realizes that policymakers, if at all, will err on the side of caution,” said Yingxi Yu at Barclays Capital.

Oil will largely continue to trade in the $65-$75 a barrel range it has maintained in the last couple of months, she said.

The market is still waiting for fundamentals to catch up with current oil prices, but the latest data indicate continued weakness in demand in the U.S., the world’s largest energy consumer.

Any fundamental argument for higher oil prices should have been allayed by the EIA’s report, which indicated some of the more bearish gasoline figures witnessed in recent years, Jim Ritterbusch, president of energy advisory firm Ritterbusch & Associates, wrote in a note to clients.

“We will continue to emphasize that a weakening dollar is about the only bullish item currently available to the energy complex,” he said.

Tags:  Fed, light crude oil