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Crude gains as weak data sparks talk of prolonged Fed stimulus

Published 05/16/2013, 02:22 PM
Updated 05/16/2013, 02:23 PM
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Investing.com - Oil prices rose in U.S. trading on Thursday after a fresh wave of disappointing economic indicators in the U.S. fanned sentiments that the Federal Reserve will keep monetary stimulus programs in play for longer than once anticipated.

On the New York Mercantile Exchange, light sweet crude futures for delivery in June traded up 0.99% at USD95.23 a barrel on Thursday, off from a session high of USD95.56 and up from an earlier session low of USD93.28.

The Federal Reserve Bank of Philadelphia reported earlier that its manufacturing index fell to -5.2 in May from 1.3 in April.

Analysts were expecting the index to improve to a reading of 2.4 in May, which fueled sentiments that loose policies at the Federal Reserve aren't going to wind down anytime soon.

Monetary stimulus tools tend to weaken the greenback and make oil a nicely priced asset in dollar-denominated exchanges, especially in the eyes of investors holding other currencies.

Elsewhere, the Department of Labor said earlier Thursday that the number of individuals filing for initial unemployment assistance in the U.S. rose by 32,000 to 360,000 last week, well above expectations for an increase of 2,000 to 330,000.

Soft inflation data also fueled talk of loose policies staying in place.

The country's consumer price index fell 0.4% in April from March, worse than expectations for a 0.2% decline, down for the second consecutive month.

Year-on-year inflation rates in the U.S. came to 1.1%, just shy of market expectations for a 1.3% reading and well below the Federal Reserve's 2% target.

Spotty data out of the housing industry dampened the dollar as well.

The Commerce Department said the number of building permits issued in the U.S. rose 14.3% to 1.017 million units in April, well above expectations for a 6.2% increase to 945,000 units.

U.S. housing starts fell by 16.5% last month to 853,000 units, outpacing expectations for a decline of 4.9% to 973,000.

Better-than-expected U.S. inventory data released on Wednesday fueled gains as well.

The U.S. Energy Information Administration said in its weekly oil and gasoline stockpile data that crude oil stocks fell by 624,000 barrels last week, more than market calls for a decline of 330,000 barrels, suggesting greater demand than anticipated.

Total gasoline inventories rose by 2.59 million barrels, defying market calls for a decrease of 780,000.

The U.S. is the world’s biggest oil consuming country, responsible for almost 22% of global oil demand.

Elsewhere on the ICE Futures Exchange, Brent oil futures for July delivery were up 0.35% at USD103.86 a barrel, up USD8.63 from its U.S. counterpart.









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