Crude gains on Federal Reserve quantitative easing measures

Crude oil futures shot up in U.S. trading on Friday after the Federal Reserve officially announced plans to stimulate the economy via a third round of quantitative easing. On the New York Mercantile Exchange, light, sweet crude futures for delivery in October traded at USD99.46 a barrel on Friday, up 1.17%, off from a session high of USD100.42 and up from an earlier session low of USD98.14. The Federal Reserve on Thursday announced plans to buy $40 billion in mortgage-backed securities a month from banks on an ongoing basis until the economy improves, a policy measure known as quantitative easing. The Fed also said it would continue with its Operation Twist program that sees the U.S. central bank selling short-term Treasury holdings in the market while simultaneously buying longer-term instruments with the aim of keeping interest rates low. The Federal Reserve will inject a total of $85 billion a month into the economy a month via its combined stimulus measures. The Fed also said conditions meriting low interest rates will likely last through mid-2015. Monetary stimulus measures in the U.S. often are bullish for commodities. Such accommodative policies tend to weaken the dollar by design and send commodities prices rising, especially oil, which shoots up on hopes for sustained demand that comes from a jolted economy and also due to a weaker dollar, which makes the commodity a nicely-priced asset in the eyes of investors holding other currencies. Elsewhere in the U.S., the country's month-on-month consumer price index rose 0.6% in August from 0.0% July. Analysts had expected CPI to rise 0.5% in August. Month-on-month core inflation rates rose 0.1% in August compared to 0.1% in July, falling short of market forecasts for 0.2% growth. Industrial production in the U.S. contracted 1.2% in August compared to a revised 0.5% expansion in July. Analyst were forecasting industrial production to expand by 0.2% in August. Consumers, meanwhile, are more upbeat these days, separate data showed. Thomson Reuters/University of Michigan's index on consumer sentiment hit 79.2 in September, up from 74.3 in August. Analysts were expecting a 74.0 reading. U.S. retail sales figures outpaced expectations as well. The U.S. Commerce Department said that retail sales rose to a seasonally adjusted 0.9% in August from 0.6% in July, whose figure was revised down from 0.8%. Analysts had expected retail sales to rise 0.7% in August. Core retail sales rose 0.8% in August, matching July's 0.8% growth figure. Analysts had expected U.S. core retail sales to rise 0.6% last month. On the ICE Futures Exchange, Brent oil futures for November delivery were up 0.97% and trading at USD117.00 a barrel, up USD17.54 from its U.S. counterpart.

Courtesy: ForexPros