* Investors hopeful of positive action by U.S. central bank
* ECB policy meet eyed, Draghi’s pledge spurs optimism
* Coming Up: FOMC policy meeting Tuesday, Wednesday
(Updates prices, adds quote)
By Luke Pachymuthu
SINGAPORE, July 30 (Reuters) – Brent crude rose toward $107
per barrel on Monday, stretching gains into a fifth consecutive
day on hopes the United States and Europe will this week
announce new measures to shore up their fragile economies,
boosting the outlook for oil demand.
Slowing growth in the United States, the world’s top oil
consumer, has triggered expectations of stimulus measures from
the Federal Reserve, which meets on Tuesday and Wednesday. Next
on investor radars is Friday’s U.S. non-farm payrolls data.
“If unemployment starts to worsen, you can be sure that the
FOMC are going to step in and inject more stimulus into the
economy,” said Tony Nunan, a Tokyo-based risk manager at
Mitsubishi Corp.
“The mandate of the FOMC is not just to curb inflation, but
it also has to sustain employment, they won’t have a choice but
to act.”
Brent crude rose 45 cents to $106.92 per barrel at
0406 GMT. U.S. crude rose 61 cents to $90.74 per barrel,
gaining for a fifth day.
Investors are also eyeing the European Central Bank’s
policy-setting meeting scheduled for Thursday for further
trading cues.
The meeting was always in focus given the threat the
long-running euro zone crisis poses to the global economy but
has become pivotal after the ECB chief Mario Draghi’s pledge
last week to do whatever was needed to save the euro.
“Mario Draghi is typically cautious, and for him to have
come out last week with such strong comments, suggests that he’s
got to have something in hand,” Nunan said.
Optimism was evident across most markets on Monday, with
Asian shares extending their gains, as European leaders
continued to reassure markets that they would not allow the euro
to break up.
On Friday, German Chancellor Angela Merkel and French
President Francois Hollande pledged to do everything in their
powers to protect the euro after discussing the latest events in
the debt crisis by telephone.
But despite the reassurances from Europe’s elite, an air of
uncertainty lingered with Spanish and Italian bond-yields
swelling into dangerous territory.
“Spain and Italy are just too large to be saved by the ECB,
if they can keep their bond-yields below the red line, they can
continue borrowing and keep going, but this only buys them
time,” Nunan said.
Oil prices, however, continued to be supported by escalating
tensions in the Middle East with rising violence in Syria
threatening to further destabilize the region.
Iran continues to face-off with the West over its nuclear
programme, fuelling uncertainty about supply in the oil markets.
The West insists Tehran is trying to develop a nuclear bomb, but
the Islamic republic has vehemently denied this assertion.
(Editing by Naveen Thukral and Himani Sarkar)
