Oil rises to $80 as traders eye low interest rates

February 22, 2010 05:18 pm | Updated November 17, 2021 07:17 am IST - SINGAPORE

A man checks his wallet along a row of olden-day shophouses leading into a tower of modern-day housing in Singapore on Monday. Singapore's 2010 budget will boost funding for job training and raise company fees on foreign workers in a bid to increase productivity and fuel growth of as much as 6.5 percent this year.

A man checks his wallet along a row of olden-day shophouses leading into a tower of modern-day housing in Singapore on Monday. Singapore's 2010 budget will boost funding for job training and raise company fees on foreign workers in a bid to increase productivity and fuel growth of as much as 6.5 percent this year.

Oil prices rose above $80 a barrel on Monday in Asia, extending a three-week rally as investors expect the U.S. central bank to keep interest rates near zero to help fuel economic growth, which would boost crude consumption.

Benchmark crude for March delivery was up 45 cents to $80.26 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract added 75 cents to settle at $79.81 a barrel on Friday.

Investors are betting that a low inflation rate and weak employment figures will lead the Federal Reserve to keep interest rates low.

The Fed surprised investors late on Thursday when it raised the so-called “discount” lending rate on emergency bank loans by one-quarter point to 0.75 percent. But Fed officials on Friday were quick to downplay the possibility of across-the-board rate hikes.

Consumer prices edged up 0.2 percent in January, the Labour Department said on Friday, and excluding volatile food and energy, prices fell 0.1 percent, the first monthly decline since December 1982.

“There’s hardly any fear of inflation right now,” said Victor Shum, an energy analyst with consultancy Purvin & Gertz. “So the thinking is the Fed will keep interest rates near zero.”

“With unemployment still high, the market doesn’t expect the Fed to raise rates until the U.S. economy is stronger.”

Low interest rates and massive government stimulus spending could also help weaken the U.S. dollar, which would further support oil prices. A weaker dollar makes dollar-based commodities such as oil cheaper for foreign investors.

Oil has jumped from $69.59 a barrel on February 5.

In other Nymex trading in March contracts, heating oil rose 1.91 cents to $2.089 a gallon, and gasoline gained 1.58 cents to $2.102 a gallon. Natural gas dropped 8.1 cents to $4.963 per 1,000 cubic feet.

In London, Brent crude was down 44 cents at $78.63 on the ICE futures exchange.

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