Oil rallied above $49 a barrel on Thursday, after a surprise move by the Federal Reserve to buy government bonds on a large scale thrashed the dollar and revived hopes the battered US economy could soon begin its recovery. The US Federal Reserve on Wednesday stunned markets by announcing it would pump another $1 trillion into the ailing US economy by buying long term government debt for the first time since the 1960s and by expanding its purchases of mortgage bonds.
US light crude for April delivery rose 96 cents to $49.10 a barrel by 0748 GMT, after having touched $49.83 earlier, erasing some of previous sessions losses. London Brent crude rose 69 cents to $48.35. The dollar inched up against a basket of currencies on Thursday, after logging its biggest daily fall since 1985, as the Feds move to buy long-term Treasuries, aimed at resuscitating lending, prompted a sharp fall in market interest rates.
The Feds move also sent Asian stocks to a five-week high, as bank shares helped extend a recent rally, and on broader optimism that a stronger US economy will help the continents export-dependent economies. Slumping demand and rising inventories have helped drag oil off record highs over $147 a barrel struck in July as the economic meltdown hit consumption across the globe. But oil prices, which sank to levels below $35 last month, have since stabilised in the $40-$50 region, as producer group Opec cuts output by 4.2 million barrels per day and vowed on Sunday to achieve stricter enforcement of existing curbs.
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