Brent rises near $111 after Fed keeps stimulus

SINGAPORE: Brent crude rose toward $111 a barrel on Thursday, extending gains for a second day after the United States kept its monetary stimulus programme intact, boosting global equities and commodity prices.

Brent and US oil gained the most in three weeks in the previous session as the US Federal Reserve's decision to delay the wind down of its massive monetary stimulus took investors by surprise, weakening the dollar and boosting demand for risky assets. Dollar-denominated commodities becomes more attractive to holders of other currencies when the greenback weakens.

Brent crude for November delivery added 28 cents to $110.88 a barrel by 0238 GMT while US crude was at $108.59, up 52 cents.

Asian equities and currencies jumped while the US dollar languished at a seven-month low against a basket of major currencies in Asia after the Fed's announcement.

"It translates to a weaker dollar and higher prices for all risk assets as we continue to have money liquidity in oversupply," Tony Nunan, a risk manager at Mitsubishi Corp. "This is going to be the story for the rest of the year."

The Fed's decision is also expected to alleviate oil import cost pressures faced by emerging markets as their currencies rebound and this could boost their oil demand, Barclays analyst Miswin Mahesh said in a note.

"News of the Fed refraining from tapering comes at the same time as relatively low spare capacity and relatively low crude and product stocks," he said. "These factors are expected to remain prevalent in the next year, reinforcing our price view of a $110 per barrel average for Brent in 2014."

Crude inventories in the United States fell last week to the lowest level since March 2012 after data from the US Energy Information Administration showed a larger-than-expected drop of more than 4 million barrels.

In the Middle East, geopolitical tensions continued to underpin oil prices although fears of a US-led military strike on Syria eased as Western powers met for a second day of talks on a Western-drafted resolution on eradicating Syria's chemical arsenal.

OPEC producer Libya's crude production has recovered to nearly 40 percent of its pre-war capacity with exports set to rise as major western fields ramped up output after protesters agreed to reopen them.