NEW YORK - Oil climbed to a four-month high on concern that protests in the Middle East and North Africa may curb supply and on speculation that the Federal Reserve will unveil more stimulus measures.
Futures rose as much as 1.6 percent as protesters tried to storm the U.S. Embassy in Sana’a, Yemen. An attack Sept. 11 killed the American ambassador to Libya, Chris Stevens, and three colleagues. Clashes at the Cairo embassy began the same day. The Federal Open Market Committee may announce a third round of bond purchases known as quantitative easing today.
“The events out of Libya and Egypt add to general geopolitical tension that is currently prevailing in the Middle East,” said Harry Tchilinguirian, the head of commodity-markets Strategy at BNP Paribas SA in London. “The market is in the wait-and-see mode for the Fed decision that will be announced later today and the consensus is that some form of quantitative easing is going to be announced.”
Crude oil for October delivery advanced $1.12, or 1.2 percent, to $98.13 a barrel at 10:25 a.m. on the New York Mercantile Exchange. The contract reached $98.58, the highest level since May 4. Futures are up 8.8 percent from this time last year.
Futures breached the August high of $98.29 and the 61.8 percent retracement level on a Fibonacci study of the decline from the year’s high of $110.55 a barrel on March 1 to the low of $77.28 on June 28, said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy.
“The rise is more technical than anything else,” Kilduff said. “We’ve broken through important resistance.”
Brent oil for October settlement increased 70 cents, or 0.6 percent, to $116.66 a barrel on the London-based ICE Futures Europe exchange. The contract touched $117.48, the highest level since May 3. The European benchmark grade’s premium to West Texas Intermediate traded in New York was at $18.53, down from $18.95 yesterday.
Smoke could be seen rising from the vicinity of the U.S. embassy compound in Sana’a, and gunfire could be heard. Yemeni police have cordoned off the area near the embassy preventing all access.
There were also demonstrations in Egypt and Iran against a film seen as insulting to Islam. In Cairo, protesters set fire to two police vehicles as authorities tried to keep them away from the U.S. embassy. At least 16 people were injured and 24 arrested, government officials said.
The attack in Libya bore the hallmarks of al-Qaeda, and may have been carried out by the group’s North Africa affiliate to mark the anniversary of the Sept. 11 attacks on the U.S., said Michigan Republican Representative Mike Rogers, chairman of the House intelligence committee.
The FOMC will probably announce a third round of bond purchases after its meeting and extend the duration of its zero- interest-rate policy into 2015, according to two-thirds of the economists surveyed by Bloomberg.
“The Fed is the primary driver and everybody is hoping to see another round of stimulus,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Mass.