Forexpros – Crude oil futures rocketed higher on Tuesday on Iranian supply disruption worries and concern that the Federal Reserve will announce additional stimulus later in the session.
On the New York Mercantile Exchange, light sweet crude futures for January settlement traded at USD100.23 a barrel during late U.S. trade, advancing 2.42%. It earlier hit a daily high of USD101.20 a barrel.
Strength in the U.S. dollar did little to hold back soaring crude prices. The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, advanced 0.53% to trade at 80.66. Dollar strength normally hurts commodity prices, as it lowers their appeal as an alternative asset and makes dollar priced commodities more expensive for holders of other currencies.
The state run Iranian news agency reported that the Iranian military has begun maneuvers at the Strait of Hormuz. This unsubstantiated report sparked fears of supply disruption from the world’s third largest oil exporter.
In additions, rumors are rampant that the Fed will announce further stimulus at the Fed Funds announcement later in the session.
However, not everyone agrees on why crude oil is soaring. Stephen Schork of the Schork Group told Bloomberg, “There are no headlines to explain this move. One has to look at the usual suspects. It was probably a fat-fingered mistake or a margin call.”
Elsewhere, on the ICE Futures Exchange, Brent oil futures for February delivery gained 1.99% to trade at USD109.22 a barrel, up USD8.99 on its U.S. Counterpart.
This nearly USD10.00 spread has been narrowing recently, but is still historically high. The two contracts traditionally trade within USD1.00 of each other.
The oil market is awaiting the results of the OPEC meeting on Wednesday.
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