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.”
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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