Oil rose to the highest in almost two weeks after the US Federal Reserve cut the cost of emergency dollar funding for European banks as part of a coordinated response to the continent's sovereign-debt crisis.
West Texas Intermediate crude jumped as much as 1.9 per cent after the Fed said in a statement that the joint action with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank was undertaken to ease strains on financial markets and help foster economic activity. The dollar index declined 0.7 per cent.
"News that the Fed and five central banks lowered interest rates on US dollar swaps weighed heavily on the dollar, with a result of a strong rally in crude oil prices," Myrto Sokou, a London-based analyst at Sucden Financial Ltd, said by email.
Crude for January delivery rose as much as $1.85 to $101.64 a barrel and was at $101.22 in electronic trading on the New York Mercantile Exchange at 1.49pm London time.
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Brent oil for January settlement was up 68 cents at $111.50 (Dh409) a barrel on the London-based ICE Futures Europe exchange, having earlier dropped 1.1 per cent. It closed yesterday up 1.7 per cent at $110.82.
The European benchmark contract's premium to New York's West Texas Intermediate was at $10.28 a barrel, compared with yesterday's close of $11.14 and a record $27.88 on October 14.
Oil rose earlier in the session after China cut the amount of cash that banks must set aside as reserves for the first time since 2008 as Europe's debt crisis dims the outlook for exports and growth.
US companies added more workers than anticipated in November, easing concern the job market is stagnating in the third year of the nation's recovery, according to a private report based on payrolls.
The 206,000 increase was the biggest this year and followed a revised 130,000 gain the prior month, Roseland, New Jersey-based ADP Employer Services said yesterday. The median forecast of economists surveyed by Bloomberg News called for an advance of 130,000.