Tuesday, August 30, 2011
Rigzone Staff
by Matthew V. Veazey
The WTI and Brent crude oil benchmarks settled higher Tuesday after the Federal Reserve left investors contemplating whether the central bank will try yet again to shore up the sagging U.S. economy.
Light sweet crude oil gained $1.63 to settle at $88.90 a barrel while the Brent picked up $2.14 to end the day at $114.02 a barrel after the Fed released the minutes of the August 9, 2011, joint meeting of the Federal Open Market Committee and the Federal Reserve Board of Governors. The minutes reveal support among some members for more monetary action to spur economic growth.
One possible Fed move, which the central bank has initiated twice since the 2008-2009 financial crisis, is quantitative easing. The approach calls for the Fed's purchase of U.S. Treasury bonds so that banks would have more money available to lend to businesses and consumers.
Both "QE1" and "QE2" yielded a weaker U.S. dollar, which in turn was bullish for crude oil. When the dollar weakens, oil—priced in greenbacks—becomes a better value for investors holding other currencies. The minutes show that the Fed voted to extend its September meeting to two days rather than one, giving it more time to consider the merits of "QE3" and any other options remaining at its disposal.
Also boosting oil was the development of Tropical Storm Katia in the eastern Atlantic Ocean. Located approximately 750 miles west of the Cape Verde Islands late Tuesday, Katia was moving toward the west-northwest at 20 miles per hour. The National Hurricane Center expects the storm to be a major hurricane by Saturday afternoon, when it should be centered to the east of the Lesser Antilles.
During Tuesday's floor trading, the WTI fluctuated from $86.46 to $89.21. The Brent peaked $114.20 and bottomed out at $111.22.
Natural gas for October delivery settled at $3.91 per thousand cubic feet, up a nickel from the final price for the now-expired September contract. October natural gas traded within a range from $3.78 to $3.92.
September gasoline gained nine cents to end the day just under $3.00 a gallon. The futures price fluctuated from $2.897 to $3.00.
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