Brent heads for best week since July

Brent oil held above $108 a barrel today, heading for its biggest weekly gain since early July on expectations the Federal Reserve will stick with its easy money policy for now.

Janet Yellen, likely to be the next Fed chief, defended the US central bank's commodity-friendly stimulus measures yesterday, suggesting that any "tapering" would not be imminentmore than 3 per cent. The December contract, which expired yesterday, settled $1.42 higher.

US crude was up 23 cents at $9 if she takes up the job.

“The market has turned a little more optimistic about the economy, and most people now think quantitative easing will be continued until next year,” said Ken Hasegawa, a commodity sales manager at Newedge in Tokyo.

Brent crude was 5 cents higher at $108.36 a barrel at 0806 GMT and looked set for a weekly gain of 4.00.

While the comments from Yellen provided a boost to risk appetite with most commodities and equities scaling higher, US crude stayed on course for a weekly drop amid high stockpiles. The benchmark has shed more than 9 per cent over six weeks.

The contract dipped to as low as $92.51 yesterday, the weakest since early June, after data from the US Energy Information Administration showed crude inventories rose for the eighth week.

US crude stocks rose 2.6 million barrels in the week ended November 8th, far more than the one million barrels analysts surveyed by Reuters had expected.

Brent’s premium to US oil futures stood near $13.75 per barrel. The spread hit an eight-month high of $15.87 yesterday.

The International Energy Agency said that while oil markets look well supplied in the short term, prices could rise in the next few months due to a seasonal increase in demand and output disruptions in some Opec producers such as Libya and Iraq.

“The recent easing of prices may be relatively short-lived,” the IEA said in its monthly report. “End-user demand is on the verge of a seasonal ramp-up while refinery throughputs look set for a steep rebound in November and December.”

Strong US production will, however, continue to create a supply overhang, according to BNP Paribas.

“The crude overhang that has been exacerbated by recent refinery maintenance is unlikely to dissipate quickly with a pick-up in refinery runs, given continuing strong growth in crude output,” the bank said in a note to clients.

Continued unrest in Libya has supported oil prices, with output down to a fraction of production capacity of 1.25 million barrels a day. Protests at oil ports have cost Libya more than $6 billion and started hitting power supplies in the North African country.

In Iraq, the government has moved swiftly to restore calm at its giant southern oilfields following violent protests. Schlumberger Ltd, the world’s top oil services company, is expected to return to work next week at Iraq’s biggest field, Rumaila.

Dozens of angry Shia Muslim workers and tribesmen stormed the Schlumberger camp in North Rumaila on Monday, wrecking offices after accusing a foreign security adviser of insulting their religion.

Rumaila pumps about 1.4 million barrels per day, more than a third of Iraq’s total output of over 3 million bpd.