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Brent comes off 27-month low, climbs towards $92 as dollar weakens

Brent crude futures rebound with possibility of U.S. Federal Reserve holding off on raising interest rates

Reuters, Thursday 9 Oct 2014
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Brent crude futures rose towards $92 a barrel on Thursday, after rebounding from a 27-month low hit in the previous session as the U.S. dollar weakened on the possibility the Federal Reserve could hold off raising interest rates.

Expectations that oil demand could increase towards the end of this month - even though U.S. crude stocks increased more than expected last week - also helped to support prices.

Minutes of the U.S. Fed's last policy meeting released on Wednesday showed signs that concerns about the impact of a strengthening greenback on the economy may delay any decision on interest rate changes.

Low interest rates "might be around for a little bit, which is supportive for commodities, not just oil," said Mark Keenan, head of commodities research in Asia for Societe Generale in Singapore.

A rise in interest rates could tighten money supply which would be negative for commodities trading.

Brent for November delivery was up 36 cents at $91.74 by 0655 GMT. The front-month contract fell as low as $90.57 on Wednesday, the lowest since June 2012, before recovering to close at $91.38 - still down 73 cents.

U.S. November crude climbed 45 cents to $87.76 after ending the previous session down $1.54. In the previous session, it hit its lowest level since April 2013 at $86.83.

"Energy prices should experience some upward push with a weakening dollar as it should be relatively cheaper to purchase energy products," Singapore's Phillip Futures said in a report on Thursday.

A falling greenback makes dollar-denominated commodities such as oil less expensive to holders of other currencies.

The dollar's index against a basket of six major currencies slipped in early Asian trade on Thursday to 85.143, its lowest level in nearly two weeks.

U.S. Crude Stocks 

Crude inventories soared a more-than-expected 5 million barrels in the week to Oct. 3, data from the U.S. Department of Energy's Energy Information Administration showed on Wednesday. A build of 1.5 million barrels had been forecast by analysts polled by Reuters.

"Demand has been pretty slack and there's oversupply. Any negative economic data out of Europe or China has reinforced this orthodoxy so prices fall further," said Phin Ziebell an oil analyst at National Australia Bank.

"If we see the U.S. recovery on track there should be stabilisation in sentiment," said Ziebell.

He forecast Brent would gradually move back to $100 a barrel in the fourth quarter, helped by seasonal factors especially if there was a cold winter in the United States as forecast.

Some analysts were encouraged by a draw of 1.58 million barrels in crude stocks at the Cushing, Oklahoma, delivery hub.

"We are moving towards seasonal demand for oil which should be supportive for prices. Demand is still low but seasonality should pick it up a little bit," Keenan said.

Increased winter demand for oil should be seen towards the end of this month, he said.

Investors were also keeping an eye on developments in the Middle East where Islamic State fighters on Wednesday launched a renewed assault on Kobani, close to the Syrian-Turkish border, as U.S. and coalition warplanes attacked IS targets in Syria.

Top diplomats from Iran, the European Union and the United States, including U.S. Secretary of State John Kerry, will meet in Vienna next week, to try to make progress towards a long-elusive deal to end a dispute over Tehran's nuclear programme by a Nov. 24 deadline.

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