Easy-Money Hopes Lift Crude To Fresh Highs

Oil futures rose to their highest level in almost a month Tuesday on the prospect that the Federal Reserve will continue its easy-money policy, while reports of Israeli warships near Egypt kept traders on guard.

Light, sweet crude for October delivery settled up $1.63, or 1.9%, to $88.90 a barrel on the New York Mercantile Exchange, the highest settlement since Aug. 3. Brent crude on the ICE Futures Europe exchange settled up $2.14, or 1.9%, to $114.02 a barrel.

Crude pushed higher as minutes from the most recent meeting of the Federal Reserve's policy-making body showed some officials raised the possibility of another round of monetary easing.

One side-effect of the policy, implemented twice already by the Fed, has been to weaken the dollar, which in turn tends to raise the price of oil by making the dollar-denominated commodity cheaper for holders of other currencies.

"I think this opens the door across the board for commodities again," said Rich Ilczyszyn, senior market strategist at MF Global in Chicago, of the Fed minutes.

The prospect of a fresh Fed stimulus has been a topic of feverish speculation in the oil market, intensifying after Chairman Ben Bernanke failed to rule it out during a speech in Jackson Hole, Wyo., last Friday.

It remains unclear, however, whether the central bank truly has the appetite for a third round of easing. Some critics have said the last two rounds of easing did little to help the weak economy. The minutes of the Aug. 9 Federal Open Market Committee did not elaborate on how many FOMC members were in favor of another round of stimulus.

Still, traders continued to keep an eye on events overseas. Reports that Israel had sent two warships to the Red Sea border with Egypt raised concerns about the prospect of additional conflict in the Middle East, some brokers said, helping to boost prices Tuesday.

The warships were dispatched following warnings that militants were planning an attack on southern Israel from Egyptian soil, according to The Associated Press.

Market participants are also keeping close watch on Libya for hints on when production and exports would restart. On Tuesday, a senior official of the rebel National Transitional Council said the country plans to rehabilitate many of its oil wells in days. Exports will resume gradually, the official said, according to news service AFP.