Forexpros – Crude oil futures were steady to higher in early Asian trading on Tuesday after U.S. Federal Reserve Chairman Ben Bernanke said new easing measures may be needed to rev the economy and bring more lasting improvement to the labor market.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in May traded at USD107.05 a barrel, up 0.02%, down from a session high of 107.17 and up from an earlier session low of USD107.02.
In the U.S., U.S. Federal Reserve Chairman Ben Bernanke said that more demand will be needed to bring more sustained improvements to the labor market, and extraordinary monetary policy tools may be needed to juice the economy.
“Further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies,” Bernanke told the National Association for Business Economics Annual Conference, Washington, D.C., according to a copy of his speech.
Such accommodative policies often include quantitative easing in the U.S., which the Fed has done twice since the downturn.
Under quantitative easing, the Federal Reserve buys assets from banks, flooding the economy with liquidity in the process to encourage hiring and steer the economy away from declining prices, with the dollar weakening in the process.
Oil often rises under such a scenario, as the ensuing rush of liquidity finds its way into dollarized commodities, where buyers in other currencies snap up suddenly cheaper raw materials.
Furthermore, oil found support on news that confidence in the German economy, Europe’s largest, is gaining ground.
The Ifo Institute said its March index of German business confidence rose to 109.8 from a revised reading of 109.7 in February.
Analysts had expected the index to stay at 109.7 this month.
A stronger European economy will need more oil and derivatives to recover, and improved sentiment indices fueled some demand.
Profit taking cooled the rally, althouhg oil remained largely steady.
On the ICE Futures Exchange, Brent oil futures for May delivery were down 0.07% and trading at USD125.58 a barrel, up USD18.53 from its U.S. counterpart.
The gap in price between the two contracts is pushing close to a nearly USD20.00 all-time high and a historical spread of USD1.00.
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