Gas and Oil Surge on Hopes of Stimulus

By FX Empire Analyst - Barry Norman
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Nymex crude oil prices gained by 0.3 percent in the last week taking cues from expectations that Tropical Storm Isaac will disrupt the oil fields in Gulf of Mexico coupled with weakness in the DX.

Additionally, statement from Fed Chairman Ben Bernanke that he won’t rule out for stimulus measures to boost the economy acted as a sportive factor for the prices. However, further upside in the prices was capped as a result of unexpected rise in US crude oil inventories.

U.S. October crude rose $1.85, or 1.96 percent, to settle at $96.47 a barrel. For the month, U.S. crude rose $8.41, or 9.55 percent, a second straight monthly rise and the biggest percentage gain since October 2011.

U.S. crude futures rose on Friday by 1.96% and posted a 9.55% gain for August after Federal Reserve Chairman Ben Bernanke said the Fed stood ready to boost the economy if necessary, though he did not give any definite signal that more monetary easing was on the way.

Crude prices got support from reports Germany and Italy remain opposed to a release of emergency consumer oil stocks, which created further uncertainty about the timing of any possible release as sanctions on Iranian exports have tightened the market and boosted prices.

U.S. crude futures were steady on Monday due to the long U.S. Labor Day holiday weekend and also a possible correction after a rally on Friday over Bernanke’s speech.

China manufacturing activities declined to the lowest level since 2009, as data reported today early morning in the form of HSBC flash manufacturing index. Causing concern of declining manufacturing activities in second largest oil consuming nation might be weighing on oil prices currently. However, most of the Asian equities are trading high on speculation of easing by major central banks of the World. Fed’s chairman Bernanke positive hint on Q3 in last Jackson Hole meet ahead of ECB meet on 6th September are holding the expectation of easing high. In the upcoming ECB meet, central bank is likely to keep interest rate unchanged however, may go for bond buying program to support the debt ridden countries.

Economic data today include PMI numbers from Europe and German which are likely to remain under growth may limit the gains during European session. The Labor Day holiday is being celebrated in the US, NYMEX will remain closed

The National Hurricane Center says that, tropical storm Kirk has become post tropical storm which may not create concern of supply disturbances in Gulf region. However, already 90 percent of production shut down has already happened in the last week. Thus, oil market tightening may support oil prices to take positive cues.

Natural gas prices are trading almost flat at $2.800/MMBTU in Globex electronic platform. U.S. natural gas futures ended higher on Friday for a third day, by warm weather that should boost air conditioning demand for the next few days, but overfed supplies and the milder mid month outlook were expected to keep buyers wary.

Front-month gas futures on the New York Mercantile Exchange ended up 5.1 cents, or 1.9 percent, at $2.799 per million British thermal units after trading between $2.707 and $2.801.

China might weigh on gas prices. However, speculation of easing by major central banks is keeping the sentiments high, which may support gas prices in today’s session.

The US Energy department said that natural gas demand has been increased in the last week with rising consumption by residential sector. So, we may expect gas prices to remain on higher side for today session.

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