Oil near 4-month high; Japan pledges more stimulus

by on January 22, 2013 5:40 am GMT

Oil traded near a four-month high in New York as Japan’s central bank said it will expand asset purchases to lift the world’s third-biggest crude consumer out of its third recession in five years. Brent prices advanced.

Futures were little changed after settling Jan. 18 at the highest price since September. There was no floor trading yesterday because of the Martin Luther King Jr. Day holiday in the U.S. The Bank of Japan (8301) will introduce open-ended asset purchases from January 2014 designed to kick start the economy. Euro-area finance ministers yesterday approved the payout of 9.2 billion euros ($12.3 billion) to Greece this month.

Quantitative-easing programs by the BOJ are “a short- to medium-term plus for world growth and commodities, including oil,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The broad view with Europe is that the immediate risks that were before us in the middle of last year have been removed now that Greece has been given liquidity support.”

Crude for February delivery, which expires today, was at $95.59 a barrel in electronic trading on the New York Mercantile Exchange, up 3 cents at 11:53 a.m. Singapore time. The more active March contract gained 8 cents at $96.12. Yesterday’s transactions will be booked with today’s trades for settlement purposes. Front-month futures rose 7 cents to $95.56 on Jan. 18, the highest close since Sept. 17.

Brent oil for March settlement on the London-based ICE Futures Europe exchange traded at $112.05 a barrel, up 34 cents. The average volume of all contracts was 4 percent above the 100- day average. The European benchmark crude was at a premium of $15.97 to New York futures for the same month. The spread was $15.16 on Jan. 17, the narrowest since July 24.

Relative Strength

Japan accounted for 5 percent of global demand in 2011, according to BP Plc (BP/)’s Statistical Review of World Energy. The U.S. consumed 21 percent and China used 11 percent, the report showed.

Oil’s advance in New York may stall as a technical indicator shows futures have climbed too quickly for further gains to be sustainable. The 14-day relative strength index is higher than 70 for a third day, according to data compiled by Bloomberg. A reading above that level signals a market is overbought and may drop.

Crude declined 7.1 percent in 2012 as the U.S. shale boom deepened a supply glut at Cushing, Oklahoma, America’s largest storage hub and the delivery point for New York futures. That left it at an average discount of $17.47 a barrel to Brent last year, compared with a premium of about 7 cents in the five years through 2010. Brent, the benchmark grade for more than half the world’s crude, advanced 3.5 percent last year.