SINGAPORE: Brent crude climbed to a more than three-month high near $109 per barrel on Thursday amid hopes the US Federal Reserve may keep its stimulus programme for now, while a sharp drop in oil inventories lifted US prices to near 16-month peaks.
A slump in the dollar, after Fed chief Ben Bernanke said the central bank would continue to pursue an accommodative monetary policy given tame inflation and a still fragile labour market, also boosted commodities priced in the greenback.
"Previously there was an anticipation that we would see a tapering of stimulus at the end of the summer, so that spooked traders and we saw that steep drop in June," said Carl Larry, president of Houston-based consultancy Oil Outlooks and Opinions LLC.
"Now that we know it's going to start sometime at the end of the year, it gives the economy some room to grow a little more, and for that unemployment number to get down to around 7 percent, which is going to be good for oil demand growth here."
Brent rose 13 cents to $108.64 by 0700 GMT, after hitting $108.84 earlier, its loftiest since April 3.
US crude was up 66 cents at $107.18 a barrel, after peaking at $107.45 earlier, its highest since March 2012. The front-month contract jumped nearly 3 percent in the previous session, its biggest daily rise since early May.
But given recent sharp gains, price movements in crude were limited on Thursday. Other commodities including gold and copper jumped about 2 percent.
Brent's premium to US crude <CL-LCO1=R> narrowed to the smallest since November 2010 at $1.32 after data from the US Energy Information Administration showed the biggest two-week drop on record in crude stockpiles, indicating demand was strong in top oil consumer the United States.
"We are finally seeing oil demand catch up with the economic recovery in the US, this is putting upward momentum on oil prices," Larry said.
The Organization of the Petroleum Exporting Countries expects a stronger economy to boost world oil demand by 1 million barrels per day in 2014, the highest growth since 2010.
According to technical charts, the US benchmark will likely face resistance at $107.24, while Brent's target of $109.51 remains unchanged.
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