Oil hovers above $107 on Bernanke comments, Iran
Oil prices hovered above $107 a barrel Tuesday after Federal Reserve Chairman Ben Bernanke suggested that the U.S. central bank would continue its policy of low interest rates to help spur job creation and economic growth.
By early afternoon in Europe, benchmark oil for May delivery was up 25 cents to $107.28 in electronic trading on the New York Mercantile Exchange. The contract was up 16 cents to settle at $107.03 per barrel in New York on Monday.
In London, Brent crude for May delivery was up 1 cent at $125.66 per barrel on the ICE Futures exchange.
Bernanke sounded cautious Monday about U.S. jobs growth despite a steady drop in the unemployment rate since mid-2011. His comments suggested the Fed may continue to prop up the economy by keeping short-term interest rates near zero and perhaps through new bond purchases, in a program called quantitative easing.
"Bernanke talked about the need to maintain the country's ultra-loose monetary policy," said analysts at Commerzbank in Frankfurt. "Resulting hopes of a further round of quantitative easing gave buoyancy also to commodity prices. The response of the market made it clear once again just how strongly commodity prices can be driven by hopes of further liquidity injections."
Meanwhile, an agreement between Iran and six world powers to meet next month raised hopes of a resolution to a dispute over the Middle Eastern country's nuclear program, but had limited immediate effect on oil prices.
Crude has jumped from $75 in October amid growing concern a military strike by Israel or the U.S. against Iran's nuclear facilities would disrupt global crude supplies.
Iran and the six nations — the United States, Britain, France, Germany, Russia and China — have agreed to meet on April 13 for new talks about Tehran's nuclear program, diplomats told The Associated Press on Monday. President Barack Obama said Sunday that there is still time to resolve the dispute over Iran diplomatically, but that the window is closing.
Other analysts expect worries about Iran will keep oil prices elevated. Iran is the world's third-largest crude exporter, and reports last week said its oil sales abroad fell sharply last month, suggesting sanctions imposed by Western powers have begun to hurt Iran's economy.
Saudi Arabia has pledged to increase production to replace Iran's lost output, but that would leave little spare capacity, analysts say.
Investors will later in the day focus on new information on U.S. stockpiles of crude and refined products.
Data for the week ending March 23 is expected to show a build of 2.75 million barrels in crude oil stocks, while gasoline stocks are seen falling by 1.5 million barrels, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
The American Petroleum Institute will release its report on oil stocks later Tuesday, while the report from the Energy Department's Energy Information Administration — the market benchmark — will be out on Wednesday.
Underscoring the challenges facing European economies, the head of the Organization for Economic Cooperation and Development urged the 17 countries using the euro to double to €1 trillion ($1.33 trillion) the money available in joint bailout funds.
Angel Gurria, secretary-general of the Paris-based international development body, said current commitments to the rescue funds, which are limited to €500 billion ($664 billion), are not enough to restore market confidence in the eurozone.
Europe needs "the mother of all firewalls," Gurria said Tuesday in Brussels, to give governments the breathing space to focus on kickstarting growth.
In other energy trading, heating oil was down 0.43 cent at $3.2422 per gallon and gasoline futures fell 0.84 cent at $3.3903 per gallon. Natural gas rose 1.1 cents at $2.237 per 1,000 cubic feet.
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Alex Kennedy in Singapore and Gabriele Steinhauser in Brussels contributed to this report.
