Oil Prices Rise Above $50 Ahead Of Expected ECB Move

Brent crude oil crept above $50 a barrel on Thursday ahead of an expected decision by the European Central Bank (ECB) to start buying bonds, a move that could push the dollar to new highs and put downward pressure on commodities.

Analysts said it was unlikely that the more than two per cent rally was related to the ECB’s proposed monetary easing program.

“It would be hard to relate this to the ECB decision today,” aid Harry Tchilinguirian, an oil analyst at BNP Paribas in London. “If indeed we get the decisions that’s expected, we should see a strengthening of the dollar which wouldn’t fit with a rally in oil prices.”

Brent crude futures traded at $50.30 a barrel by 1215 GMT, up $1.27. U.S. crude was up $1.06 at $48.84, having reached a high of $49 earlier in the session.

The ECB’s Executive Board has proposed a programme that would allow it to buy 50 billion euros ($58 billion) of bonds a month starting in March, a euro zone source said. The expected stimulus programme has pressured the euro and sent the dollar, seen as a safe haven, soaring.

A strong dollar, buoyed by an expected U.S. interest rate increase and an American economy that is growing while Europe and Asia slow, dents demand for dollar-priced commodities by making them expensive for holders of other currencies.

Oil prices have already more than halved since June last year due to oversupply and a fall in global demand.

CMC Markets analyst Michael Hewson said the expected ECB so-called “quantitative easing” policy, printing money to buy sovereign bonds, was unlikely to affect oil prices in the long term.

“I find it difficult to think that anything the ECB announces today is really going to alter the supply-demand dynamics with respect to oil prices,” he said.

“We may get some intra-day volatility, but will it change the overall direction of the oil price? I doubt it.”

Analysts expect U.S. crude stocks to have increased by roughly 2.6 million barrels in the last week, further depressing oil prices. Data from the U.S. Department of Energy’s Energy Information Administration (EIA) will be released at 1600 GMT Thursday.

In a formation known as a “contango”, Brent crude prices for delivery this March are $10 a barrel cheaper than those for March 2016, making it attractive to buy oil now and put it into storage for sale later, traders say.