Brent crude advanced to the highest level in more than a week as Japan’s central bank said it will expand asset purchases to lift the world’s third-biggest oil consumer out of the recession.
Futures rose as much as 0.7 percent to the highest since Jan. 10. The Bank of Japan (8301) will introduce open-ended asset purchases from January 2014 to boost the economy. Euro-area finance ministers yesterday approved a payout of 9.2 billion euros ($12.3 billion) to Greece this month.
“Expectations for stimulus in Japan have been propping up markets in otherwise thin trading,” said Andrey Kryuchenkov, an analyst at VTB Capital in London who predicts Brent may find resistance at $112.50 a barrel this month.
Brent for March settlement climbed as much as 77 cents to $112.48 a barrel, and traded for $112.11 as of 1:21 p.m. on the ICE Futures Europe exchange in London. The average volume of all contracts was 17 percent higher than the 100-day average. The benchmark was at a premium of $16.08 to New York crude futures. The spread was $15.16 on Jan. 17, the narrowest level based on closing prices since July 24.
West Texas Intermediate for February delivery, which expires today, was at $95.53 a barrel, down 3 cents, in electronic trading on the New York Mercantile Exchange. The more active March contract was at $95.95. Yesterday’s transactions will be booked with today’s trades for settlement purposes as there was no floor trading because of the Martin Luther King Jr. Day holiday in the U.S.
Brent is forecast to trade from $107 to $118 a barrel in the first quarter of this year, barring unexpected supply disruptions in North Africa and Syria, Gordon Kwan, the head of research at Mirae Asset Securities Hong Kong Ltd., said in a report dated today.
The BOJ will purchase about 13 trillion yen ($145 billion) of assets per month while setting a 2 percent inflation target, the bank said in Tokyo today. The nation hasn’t had sustained price gains of that size in two decades. Japan accounted for 5 percent of global crude demand in 2011, according to BP Plc (BP/)’s Statistical Review of World Energy. The U.S. consumed 21 percent and China used 11 percent.
Quantitative-easing programs by the BOJ are “a short- to medium-term plus for world growth and commodities, including oil,” said Ric Spooner, a chief market analyst at CMC Markets in Sydney. “The broad view with Europe is that the immediate risks that were before us in the middle of last year have been removed now that Greece has been given liquidity support.”
Oil’s advance in New York may stall as a technical indicator shows futures have climbed too quickly for further gains to be sustainable. The 14-day relative strength index is above 71 for a third day, according to data compiled by Bloomberg. A reading higher than 70 signals a market is overbought and may drop.
WTI declined 7.1 percent in 2012 as the U.S. shale boom deepened a supply glut at Cushing, Oklahoma, America’s largest storage hub and the delivery point for New York futures. That left it at an average discount of $17.47 a barrel to Brent last year, compared with a premium of about 7 cents in the five years through 2010. Brent, the benchmark grade for more than half the world’s crude, advanced 3.5 percent last year.
Libya, which holds Africa’s biggest crude reserves, is pumping 1.1 million barrels a day and is targeting output of 1.7 million barrels, Oil Minister Abdulbari Al-Arusi said in an interview in Tripoli yesterday. The country’s daily output may rise to 2 million barrels in two years, he said.
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