Oil prices rose on Tuesday in choppy trading as expectations that the US Federal Reserve will act to bolster the economy and that a German court will approve a euro zone rescue plan put pressure on the dollar and boosted crude futures. Fed policy makers conclude their two-day meeting on Thursday. Some analysts and investors expect the US central bank to launch a third round of bond-buying because of recent weak US economic data.
Additional stimulus would likely weaken the dollar and boost dollar-denominated oil prices. The euro climbed to a four-month peak against the dollar on expectations a German court decision expected on Wednesday will back the euro zone rescue process, lending support to the region's common currency.
Higher August production reported by the Organisation of the Petroleum Exporting Countries and recovering US production after Hurricane Isaac's trek last week through the Gulf of Mexico helped keep prices in check. Moody's ratings agency warned the US credit rating may be downgraded if 2012 budget negotiations do not produce debt-reducing policies, adding more pressure to the dollar and helping support crude.
"Moody's downgrade pressured the dollar and added support for crude, but markets are waiting for the German court and Fed decisions," said Phil Flynn, an analyst at Price Futures Group in Chicago. Brent October crude rose 59 cents to settle at $115.40 a barrel, having traded from $114.37 to $115.46. The Brent October contract expires on Thursday.
US October crude pushed 63 cents higher to settle at $97.17 a barrel, back above the 200-day moving average of $96.61, a closely watched technical indicator. The $97.31 session high was still almost a dollar below the $98.29 intraday peak from Aug. 23. Prices fell to $93.95 on Aug. 30 and have remained in the $94-$98 range since. Total crude trading volume was tepid ahead of the German court and Federal Reserve meeting results. Brent turnover exceeded its 30-day average by 1.6 percent, with US dealings 7 percent under their 30-day average. US October heating oil and RBOB gasoline rose 0.6 percent. Gasoline's $3.0488 session peak left the $3.0541 contract high in place.
Opec production rose about 260,000 barrels per day (bpd) in August, the producer group said in a monthly report that left its demand growth forecast for 2013 unchanged. Opec said the production rise came even with a European Union embargo on Iran's exports because of higher output from other members of the 12-member group.
Crude prices jumped more than 9 percent in August and sparked concern in the United States and other consumer governments about the threat to already anaemic economic growth from rising oil prices. The possibility that strategic petroleum reserves may be released to curb surging prices, address storm-related US supply disruptions or mitigate the impact of the EU embargo on Iranian oil, has helped limit bullish sentiment, according to analysts and traders.
The US Energy Information Administration on Tuesday raised its forecast for 2013 global oil demand growth by 130,000 bpd and lowered its forecast for non-Opec oil production for both this year and next. US crude oil inventories likely dropped last week, according to a Reuters survey of analysts on Tuesday. Gasoline stocks also were expected to be down, but distillate supplies were expected to be near flat, up only 200,000 barrels.
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