Oil rose on Monday as comments from US Federal Reserve Chairman Ben Bernanke reinforced expectations that interest rates will be kept low. Those comments bolstered markets and weakened the dollar. Bernanke said accommodative monetary policy would support demand and, over time, drive down long-term unemployment.
That underscored views that an easy monetary policy would remain in place for some time, which fanned expectations for more quantitative easing. Previous rounds of Fed asset purchases have weakened the dollar and boosted commodities and stocks.
US stock indexes rose 1 percent after Bernanke's comments. Crude earlier found support from an unexpected improvement in German business sentiment, which rose for a fifth straight month in March. "The Bernanke comments and the overnight German confidence reading were on the plus side, but without further Iran and North Korea jitters, the positive economic news is more than priced in," said John Kilduff, partner at Again Capital LLC.
Geopolitical concerns, especially about the potential disruption of Iranian crude supplies due to Tehran's stand off with the West over the Opec nation's nuclear program, have sent Brent prices up 18 percent this year. Brent crude gained 52 cents to settle at $125.65 a barrel after dipping as low as $124.58 a barrel, just above the 20-day moving average of $124.45.
US crude rose 16 cents to settle at $107.03 a barrel. The intraday lows tested below the US crude 10-day moving average at $106.45 and the 20-day MA at $106.58. On Friday, both Brent and US crude rallied more than 1 percent, as details emerged of the first sizeable drop in Iran's oil exports as some buyers stopped or scaled back purchases to avoid Western sanctions.
US RBOB gasoline futures led the complex higher, rising nearly 1 percent to settle at $3.417 a gallon, marking the highest settlement since April 2011. Concerns about supplies grew after ConocoPhillips reported a problem with its gasoline making Fluid Catalytic cracking unit at its Bayway refinery in Linden, New Jersey, over the weekend. The region is already threatened with supply shortfalls this summer due to the loss of refineries due to poor economics.
The euro hit its highest against the dollar in three weeks. The US currency slid to a three-week low against the Swiss franc and the dollar index weakened. An unexpected drop in US pending home sales in February also weighed on the dollar, but helped hem in oil prices.
Developments in South Sudan helped limit oil's price rise on Monday. On Saturday, South Sudan said it hoped to resolve a dispute over oil and other outstanding issues with Sudan within a month or two that has shut in 350,000 barrels per day of the new nation's production. Traders were also watching developments in North Korea. US President Barack Obama told his Chinese counterpart, Hu Jintao, the United States was open to starting dialogue with North Korea, but only if it meets international commitments, a senior White House aide said. North Korea's plan for a long-range rocket launch next month has added to geopolitical uncertainty.