Crude oil was trading near four-month highs on Monday on hopes that a revival of growth momentum in the U.S. would boost demand. Oil futures also rose on continuing tensions in the Middle East, though the rise was capped as traders booked profits.
As it had been announced by the U.S. Federal Reserve last week, the U.S. government started to buy mortgage-backed debt as part of its efforts to stimulate the economy. U.S. will be releasing crucial housing data on Wednesday and ahead of that economists said that there had been a rise in the construction of new homes and sales of pre-owned homes.
There was little change in October crude at slightly more than $99 a barrel, which had touched a high of $100 a barrel . Crude had recorded a weekly gain of 2.7 percent. Brent for November settlement fell 41 cents to $116.24 a barrel on the London-based ICE Futures Europe exchange.
Analysts commenting on the price rise said that speculative buying was likely to hold up the prices of oil in the medium term. Tensions in the Middle East over a video allegedly detrimental to Islam have spread like wildfire throughout Muslim-dominated countries.
While the rise of crude oil is generally pegged to a growth in the economy, which triggers off demand, analysts fear that an undue rise in prices could hamper the growth as fuel costs rise.
However oil prices are much lower now that what they were in March when it was ruling at around $127 a barrel. Also the dollar is much stronger now than what it was at the start of the year.
Certain analysts have predicted that oil may again touch $120 a barrel on renewed demand from a resurgent U.S. economy.
United States Oil Fund LP (ETF) (NYSEARCA:USO) was trading flat, Exxon Mobil Corporation (NYSE:XOM) was up 0.20%, Suncor Energy Inc. (USA)(NYSE:SU) surged 0.54%, BP plc (ADR)(NYSE:BP) added 0.50% and Chevron Corporation (NYSE:CVX) gained 1%.