Oil Set for Fifth Week of Gains as Fed Plan Targets U.S. Growth

March 20 (Bloomberg) -- Crude oil is poised to gain for a fifth week, the longest winning streak in 11 months, after rising above $50 a barrel on the Federal Reserve’s plans to spur growth by spending $1 trillion buying back debt.

Oil climbed 7.2 percent yesterday to close at a three month high after the Fed said it was seeking to purchase U.S. Treasuries, mortgage-backed bonds and other de19bt, raising expectations that efforts to end the global recession will boost fuel demand. The dollar traded at a two-month low against the euro, prompting investors to purchase oil and other commodities as an alternative investment.

“This is a pretty bold move that should stimulate the economy,” said Rick Mueller, a director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “There may be an earlier economic recovery, which will increase oil demand. The dollar is getting hammered because of increased inflation fears, which makes oil look like a safe haven.”

Crude oil for April delivery fell 76 cents to $50.85 a barrel on the New York Mercantile Exchange at 10:06 a.m. in Sydney. Oil is up 10 percent this week, set for its longest series of weekly gains since April 2008.

Yesterday, futures rose $3.47 to $51.61 a barrel, the highest settlement since Nov. 28. The April contract expires today. The more-active May contract decreased 62 cents to $51.42 a barrel after advancing $3.14 to $52.04 a barrel yesterday.

OPEC Cuts

Oil has risen 50 percent in the past three months from the Dec. 19 close of $33.87 a barrel. Crude has gained 14 percent so far this year as record production cuts by the Organization of Petroleum Exporting Countries have started to reduce a supply glut caused by the worst economic crisis since World War II. Prices are down 65 percent from July’s record of $147.27 a barrel.

“The Fed said they’re going to do everything they can to reflate us out of this, and don’t fight the Fed,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida. “This is right up energy’s alley.”

The trade-weighted Dollar Index, which tracks the currency’s performance against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, slid yesterday for an eighth day, the longest stretch in a year.

The dollar was down 1.4 percent to $1.3667 per euro from $1.3474 March 18.

‘Flood’ of Money

“The Fed is flooding the market with money,” said Michael Fitzpatrick, a vice president for energy at MF Global Ltd. in New York. “This is going to be very inflationary in the long term, which will encourage the purchase of real things, such as commodities.”

Gold yesterday jumped the most since September and copper surged to the highest since November on the Fed announcement. The Reuters/Jefferies CRB Index of 19 prices rose 11.36, or 5.3 percent, to 225.30, the highest since Jan. 26.

The decline in the value of the U.S. currency, which helped push oil to the July record, will not “be on the agenda” at OPEC’s next meeting, the group’s president, Jose Maria Botelho de Vasconcelos, said.

The May 28 meeting will focus instead on how the oil market is reacting to OPEC’s March 15 decision to hold targets steady and concentrate on complying with earlier cuts, he said in an interview in Vienna yesterday. Botelho de Vasconcelos is also the oil minister for Angola.

OPEC ‘Rewarded’

OPEC members “have been rewarded now with a higher price,” Daniel Yergin, chairman of Cambridge Energy Research Associates, said in a Bloomberg Radio interview.

The producer group will reduce crude-oil shipments by 3.3 percent in the month ending April 4, according to Oil Movements. Members will load 22.41 million barrels a day in the period, down from 23.18 million a day in the month ended March 7, the Halifax, England-based tanker tracker said in a report yesterday.

Government efforts to revive global economies will have a bigger impact on oil prices than OPEC policy as demand declines by 1.8 million barrels a day this year, Yergin said.

“There’s still definitely a lid on prices for at least several months,” Yergin said.

Brent crude oil for May settlement rose $3.01, or 6.3 percent, to $50.67 a barrel on London’s ICE Futures Europe exchange. Futures settled at the highest since Nov. 28.