Oil up fourth day as stimulus hopes support

NEW YORK Fri Jul 27, 2012 4:57pm EDT

An employee holds a gas pump at a gas station of Hyundai Oilbank in Seoul June 15, 2012. REUTERS/Choi Dae-woong

An employee holds a gas pump at a gas station of Hyundai Oilbank in Seoul June 15, 2012.

Credit: Reuters/Choi Dae-woong

NEW YORK (Reuters) - Oil prices rose a fourth day on Friday on hopes for more stimulus from the U.S. Federal Reserve after data showed U.S. economic growth slowed in the second quarter as expected.

Dollar-denominated crude futures saw choppy trading as the euro and dollar .DXY also seesawed, buffeted by comments from European leaders. <USD/>

The euro hit a three-week high, lifted early after French leader Francois Hollande and his German counterpart, Angela Merkel, said they are determined to do all they can to safeguard the single currency.

The euro hit the session high on a report that European Central Bank President Mario Draghi would favor giving the bailout fund a banking license and would meet with German's Bundesbank President Jens Weidmann.

"Financial markets see a benign mix of gently rising risk appetite as worries over an imminent euro zone disaster ease and prospects for another U.S. stimulus increase," said Carsten Fritsch, oil analyst at Commerzbank in Frankfurt.

Brent September crude rose $1.21 to settle at $106.47 a barrel, posting a 36-cent loss for the week after four straight weekly gains. The premium to October Brent stayed above $1 a barrel.

U.S. September crude gained 74 cents to settle at $90.13 a barrel, ending with a 1.43 percent weekly loss after gaining the previous two weeks.

But both contracts stayed on track to register healthy monthly gains next week, after both Brent and U.S. crude suffered double-digit tumbles in the second quarter.

Total Brent crude trading volume lagged the 30-day average by 33 percent and U.S. turnover trailed its 30-day average by 28 percent, with less than an hour of post-settlement trading left.

U.S. RBOB gasoline futures jumped 7.40 cents and heating oil rose 2.10 cents, ahead of front-month August contract expirations on Tuesday.

"RBOB futures ... were supported by a Midwest refinery snag and by the usual speculative short covering that often precedes monthly contract expiration," Jim Ritterbusch, president at Ritterbusch & Associates said in a note.

Money managers raised their net long U.S. crude futures and options positions in the week to July 24, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

They boosted their net long RBOB gasoline positions, while heating oil moved from net short to net long. <ID:L2E8IRAXR>

SHOW ME THE STIMULUS

The euro's volatile trajectory on Friday followed Thursday's stock market and oil price rise after Draghi said the ECB was ready to do whatever it takes within its mandate to preserve the euro.

Oil prices held gains after the Thomson Reuters/University of Michigan final reading showed U.S. consumer sentiment fell in July to its lowest level of the year.

Sputtering U.S. growth has encouraged some economists and market participants to expect that the Federal Reserve will act to provide more economic stimulus, a move that would probably weaken the dollar.

U.S. economic growth slowed as expected in the second quarter, expanding at an annual rate of 1.5 percent, leaving open the door for the Federal Reserve to decide additional stimulus is needed.

"The 1.5 percent reading may make somewhat more difficult for the Federal Reserve to embark on additional easing, but does not preclude it in the least," said John Kilduff, partner at Again Capital LLC in New York.

"The prospect for easing will be supportive for crude oil, other commodities and equities," he added.

U.S. stocks advanced, with the S&P 500 reaching the highest level since May 4, when equities fell sharply on disappointing U.S. April jobs numbers. .N

The Thomson Reuters-Jefferies CRB index .CRB, a commodity market bellwether, pushed up 0.72 percent.

MIDDLE EAST UNCERTAINTY PERSISTS

The violence and turmoil in Syria and tension between the West and Iran over the disputed Iranian nuclear program continue to fuel uncertainty in oil markets.

Syrian President Bashar al-Assad's forces renewed a ground and aerial bombardment of Aleppo on Friday.

Iran has allocated billions of dollars to self-insure its oil tankers, Tehran's latest effort to get oil to buyers through the financing obstacles of Western sanctions.

In addition to an embargo on purchasing Iranian oil, the European Union on July 1 imposed a ban on insurance for tankers carrying Iranian oil.

(Additional reporting by Gene Ramos in New York, Christopher Johnson in New York and Luke Pachymuthu in Singapore; Editing by Marguerita Choy, David Gregorio Sofina Mirza-Reid)

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