Crude oil rebounded after the U.S. Federal Reserve unexpectedly announced debt purchases aimed at lowering consumer borrowing costs and ending the recession, prompting gains in equities and a drop in the dollar.
The Fed plans to buy as much as $300 billion of Treasuries, as much as $750 billion of bonds backed by government-controlled mortgage companies and $100 billion in debt from other government agencies to loosen credit and boost home sales.
“The oil market rallied after the Fed announced the government would spend upwards of $1 trillion additional dollars to buy up mortgage-backed assets and treasury bills,†said Mike Sander, an investment adviser at Sander Capital Advisors Inc. in Seattle. “The rally carried on after a boost from a falling dollar†and rising equities, he said. “If the dollar continues to fall and the stock market continues to rally, oil could go much higher.â€
Crude oil for April delivery rose $1.28, or 2.7 percent, to $49.42 a barrel on the New York Mercantile Exchange at 10:41 a.m. Sydney time. Yesterday, futures fell $1.02, or 2.1 percent, to settle at $48.14 a barrel. Prices are up 7.9 percent this year.
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