LONDON: Brent crude oil dipped towards $48 a barrel on Thursday ahead of an expected decision by the European Central Bank (ECB) to start buying bonds, a move which could push the dollar to new highs and put downward pressure on commodities.
The ECB's Executive Board has proposed a programme that would allow it to buy 50 billion euros ($58 billion) of bonds a month starting in March, a euro zone source said. The expected stimulus programme has pressured the euro and sent the dollar, seen as a safe haven, soaring.
A strong dollar, buoyed by an expected U.S. interest rate hike and an American economy that is growing while Europe and Asia slow, dents demand for dollar-priced commodities by making them expensive for holders of other currencies.
Oil prices have already more than halved since June last year due to oversupply and a fall in global demand.
Brent crude futures traded at $48.75 a barrel by 0910 GMT, down 28 cents. U.S. crude was down 50 cents at $47.28.
Petromatrix oil analyst Olivier Jakob said oil markets were expecting ECB President Mario Draghi to announce the so-called "quantitative easing" policy, printing money to buy sovereign bonds, later on Thursday.
"The expectations are for quantitative easing but Draghi has failed to deliver so many times," he said.
"It's really difficult to make a proper call ahead of the ECB decision. The market is going to be quiet until then."
Oil prices have steadied near $50 a barrel in January and analysts say the long-term outlook is improving. In a formation known as a "contango", the price of oil to be delivered immediately is trading well below barrels for supply in the future.
"The Brent contango has been narrowing," said Jakob. "The structure has been improving while the flat price has been bottoming."
"The market right now is consolidating before trying to determine which will be the next directional trend."
Brent crude prices for delivery this March are $10 a barrel cheaper than those for March 2016, making it attractive to buy oil now and put it into storage for sale later, traders say.
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