Crude oil futures advanced Monday as sentiment was buoyed on speculation that major central banks around the world would act to tackle the deteriorating global economic conditions.
Light sweet crude for September delivery gained 0.22 percent or 20 cents to $90.33 a barrel in electronic trading on the New York Mercantile Exchange during the Asian trading hours. Brent crude oil futures for September delivery rose 0.12 percent or 13 cents to $106.60 a barrel on the ICE futures exchange in London.
A worker holds a cup of crude oil to be tested at the Cenovus Foster Creek SAGD oil sands operations near Cold Lake.
Oil futures rallied last week following ECB President Mario Draghi's statement that the bank was ready to do "whatever it takes" to help support the euro. Draghi suggested that the size of the sovereign risk premium in Spain and Italy was hampering the functioning of the monetary policy transmission channel and, therefore, came within the mandate of the central bank.
Market participants interpreted his comments as a signal that the bank might restart the sovereign bond purchases under its Securities Market Programme (SMP), which has been inactive for around four months. Expectations got high after German Chancellor Angela Merkel and French President Francois Hollande said in a joint statement Friday that they would do "everything" necessary to safeguard the single currency.
Sentiment was also supported by hopes for further monetary incentives from the Federal Reserve. Investors are optimistic that the recent weak economic data, including a slowdown in job creation, coupled with the intensifying crisis in the euro zone, would force policymakers to announce further policy stimulus, such as a third round of asset purchases (QE3), at its policy meeting Wednesday.
However, analysts expect that the Fed will want to wait for more data, particularly on employment, before considering any significant policy changes. The U.S. Department of Labor's monthly non-farm payrolls report, which is the most closely watched economic statement pertaining to the job market and a key gauge for the direction and pace of the economic recovery, will be released Friday. Economists expected a rise of 90,000 jobs last month and an unchanged unemployment rate at 8.2 percent.
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