Forexpros – Crude oil futures spiked above USD101 a barrel on Thursday, extending strong overnight gains fuelled by the Federal Reserve’s pledge to keep interest rates low until late 2014, while growing concerns over a disruption to Iranian crude exports provided further support.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in March traded at USD101.12 a barrel during early U.S. morning trade, surging 1.74%.
It earlier rose by as much 1.95% to trade at USD101.22 a barrel, the highest since January 19.
Crude’s strong gains came on the back of a broadly weaker U.S. dollar. The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.35% to trade at 79.31, the lowest since December 12.
The U.S. dollar came under broad selling pressure after the Fed said in a statement Wednesday that economic conditions “are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.”
The new commitment replaces the statement that economic conditions were likely to stay at the historic low range of 0% to 0.25% until at least mid-2013.
At his press conference following the decision, Fed Chairman Ben Bernanke said that policy makers were “prepared to provide further monetary accommodation” and added that bond buying is “an option that’s certainly on the table.”
Meanwhile, Iran threatened to pre-empt a European embargo on its oil by halting its exports to the region immediately.
Emad Hosseini, spokesman for the Iranian parliament’s energy committee, said earlier that lawmakers in Tehran were finalizing a draft bill to stop all oil trade with Europe.
The International Monetary Fund warned Wednesday that a halt of Iran’s oil exports to countries in the Organization of Economic Cooperation and Development would likely lead to an increase in crude prices of as much as USD30 a barrel.
Elsewhere, Greek media reported earlier that the country’s creditors were prepared to accept lower interest rates on new bonds to be issued to replace their existing Greek holdings.
An agreement is necessary if Greece is to get the next tranche of bailout funds that would prevent a devastating debt default. Greece does not have enough money to cover a EUR14.5 billion bond repayment due March 20.
Oil traders largely shrugged off a government report showing that the number of individuals filing for initial jobless benefits in the U.S. last week rose more-than-expected.
A separate report said that U.S. durable goods orders advanced for the third consecutive month, climbing 2.1%, above expectations for a 0.9% rise.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for March delivery rose 1.4% to trade at USD111.33 a barrel, with the spread between the Brent and crude contracts standing at USD10.21 a barrel.
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