Brent crude edged toward $109 a barrel on Tuesday on cautious optimism that the Federal Reserve’s new head will signal the central bank’s commodity-friendly monetary policy is to remain for now
With all eyes on Janet Yellen in her first testimony to Congress, many investors expect her to indicate slower stimulus tapering following recent mixed data in the world’s biggest economy.
“If Yellen, as expected, gives a dovish testimony, it will give some assurance to oil markets,” investment analyst at Phillip Futures in Singapore, Chee Tat Tan, said.
“The greenback would be likely to weaken further, which would help lift demand for crude oil.”
Brent crude for March delivery was up 8 cents at $108.71 per barrel early on Tuesday, after settling 94 cents lower. The contract, which expires on Thursday, traded as high as $109.75 on Monday, its highest since 2 January.
US crude traded 6 cent higher at $100.12 a barrel. The contract closed above the $100-mark on Monday for the first time this year.2
The Fed has begun cutting its bond purchases by $10bn a month as the US economy showed signs of strength. The move marks perhaps its most difficult policy shift after five years of easy money that has provided support for risky assets such as commodities.
The dollar wallowed near a two-week low against a basket of major currencies early on Tuesday.
US oil hovered around a six-week high, supported by an expected drop in distillate inventories last week, in part due to continuing freezing weather across the country.
A survey of five analysts, taken ahead of weekly inventory reports from the American Petroleum Institute and the US Energy Information Administration, forecast distillate stocks, including heating oil and diesel fuel, fell 2.3 million barrels in the week to 7 February.
However, the possibility of milder weather next week curbed demand for heating oil in recent days and raised the prospect of an end to a long winter, even as another snowstorm is expected in the US north-east this week