Oil prices rose to near $83 a barrel Monday due to the weakening of the dollar and expectations that the U.S. central bank will soon move to bolster a spluttering economic recovery.
By early afternoon in Europe, benchmark crude for November delivery was up 13 cents to $82.79 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 99 cents to settle at $82.66 on Friday.
Investors are anticipating that September’s weak U.S. employment report will push the Federal Reserve at a meeting next month to buy Treasury bonds and take other measures known as quantitative easing to lower long-term interest rates and spur lending.
Driving interest rates lower will encourage investors to place money in assets such as stocks and commodities. However, the policy would also put more dollars into circulation, causing the currency to decline.
A weaker dollar generally lifts prices by making crude cheaper for investors holding other currencies.
“The growing certainty of further quantitative easing by the Fed has weakened the U.S. dollar, lent support to equity markets and caused commodity prices to rise again,” Commerzbank said in a report.
Private employers added 64,000 workers last month, short of the 75,000 economists expected, the government said Friday. Overall, 95,000 jobs were slashed as governments laid off temporary workers, and the unemployment rate held steady at 9.6 percent.
“Once investors started seeing the jobs data in terms of quantitative easing rather than as a sign that the economy has really run out of all its forward thrust, oil prices advanced,” Cameron Hanover said in a report. “The economy is so anemic, investors are taking heart that the Fed will help.”
In other Nymex trading in November contracts, heating oil rose 0.63 cent to $2.2882 a gallon and gasoline gained 1.24 cents to $2.1636 a gallon. Natural gas dropped 4.6 cents to $3.605 per 1,000 cubic feet.
In London, Brent crude added 10 cents to $84.13 a barrel on the ICE Futures exchange.