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Crude Oil Increases After U.S. Loses More Jobs Than Forecast
2010-10-08 15:30:13.323 GMT
By Margot Habiby
Oct. 8 (Bloomberg) -- Crude oil climbed above $82 a barrel
amid speculation the Federal Reserve will buy more debt to
stimulate the economy after a government report showed the U.S.
lost more jobs than forecast in September.
Oil rose as much as 1.5 percent as the dollar pared gains
following the Labor Department report. The Fed may purchase
bonds in a strategy known as quantitative easing, weakening the
U.S. currency and boosting dollar-denominated commodities.
"It's back to the currency trade," said Rich Ilczyszyn, a
senior market strategist at Lind-Waldock, a broker in Chicago.
"Quantitative easing is definitely on the table. The Fed may
increase the money supply to keep rates relatively low and
inspire people to take on risk."
Oil for November delivery rose $1.17, or 1.4 percent, to
$82.84 a barrel at 10:59 a.m. on the New York Mercantile
Exchange. Earlier today it touched $83.05 a barrel. Futures are
poised to increase for a third consecutive week, the longest
stretch of gains since June. Prices have advanced 16 percent in
the past year.
Brent crude for November settlement jumped 90 cents, or 1.1
percent, to $84.33 a barrel on the ICE Futures Europe exchange
in London.
The unemployment numbers "are making quantitative easing
all the more likely, so crude, like all other dollar assets,
should soar," said Alexander Ridgers, head of commodities at
London-based CMC Markets, which handles more than $150 million a
day in U.S. crude contracts.
Jobs Report
Earlier, oil fell as much as 1.7 percent as the Labor
Department said employers cut staffing by 95,000 workers,
reflecting a decline in government payrolls that shows the
damage being done by rising fiscal deficits.
The median estimate of economists surveyed by Bloomberg
News called for a drop of 5,000.
"The jobs number was lousy," said Phil Flynn, a Chicago-
based analyst and trader with investment adviser PFGBest. "The
Fed has indicated that the recovery won't be official in their
eyes until the job market recovers."
The dollar was little changed against the euro at $1.3932
per euro from $1.3926 yesterday in New York. Earlier, it gained
as much as 0.7 percent.
The Reuters/Jefferies CRB Index of 19 commodities surged
2.4 percent to 294.25, the highest level since October 2008.
Eighteen of the commodities increased.
Fed Signals
Bill Gross, who runs the world's biggest bond fund at
Pacific Investment Management Co., said the report is a "strong
signal" for further Fed action, in a radio interview on
"Bloomberg Surveillance" with Tom Keene. The Fed will likely
buy $100 billion in government securities a month to keep
borrowing costs down, he said.
The U.S. unemployment rate unexpectedly held at 9.6 percent
in the Labor Department report. Projections of 83 economists
surveyed by Bloomberg before the report ranged from 9.6 percent
to 9.8 percent.
Crude may decline next week as U.S. inventories increase
and fuel consumption drops, a Bloomberg News survey showed.
Seventeen of 33 analysts, or 52 percent, forecast crude oil will
decline through Oct. 15. Twelve respondents, or 36 percent,
predicted an increase, and four estimated prices will be little
changed. Last week, 42 percent said crude would climb.
For Related News and Information:
Top energy, oil stories ETOP <GO> and OTOP <GO>
News on oil inventories TNI OIL INV <GO>
News on oil markets NI OILMARKET <GO>
OPEC news: NI OPEC <GO>
Global Energy Statistics ENST <GO>
--With assistance from Rachel Graham in London, Timothy R. Homan
in Washington and Tom Keene, Liz Capo McCormick and Mark Shenk
in New York. Editors: Joe Link, Kim Jordan
To contact the reporter on this story:
Margot Habiby in Dallas at +1-214-954-9452
or mhabiby@bloomberg.net.
To contact the editor responsible for this story:
Dan Stets at +1-212-617-4403 or dstets@bloomberg.net.
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