Oil extends gains as Fed keeps stimulus unchanged

Global crude oil prices rose further on Thursday after the US Federal Reserve's surprise decision to leave its aggressive stimulus programme unchanged, boosting energy demand hopes, analysts said. Brent North Sea crude for delivery in November gained 30 cents to $110.90 a barrel in London midday deals. New York's main contract, West Texas Intermediate for October added 64 cents to $108.71. The Fed confounded market expectations overnight with its decision to refrain from tapering its $85-billion-a-month bond-buying programme, unleashing a worldwide markets rally. Both oil contracts had surged by more than two and a half dollars on Wednesday following the news. "The Fed surprised the markets yesterday after reporting that there will be no tapering in its bond buying programme," said senior energy analyst Myrto Sokou at the Sucden brokerage in London. "Global equity markets and commodities rallied on the unexpected Fed decision, while crude oil prices rebounded strongly." Markets had expected the US central bank's policy setting Federal Open Market Committee (FOMC) to scale down its $85 billion a month bond-buying spree. But the FOMC said that although the economy appears to be holding up amid government spending cuts, it "decided to await more evidence that progress will be sustained" before deciding to scale down the stimulus package. The news has buoyed oil demand hopes in the United States, which is the world's top crude consuming nation. "We expect the recent rally in the oil market to continue, as risk appetite has returned to the markets," Sokou continued. "In addition, as the QE programme is set to continue in the markets, we could expect a strong recovery in the US economy that could increase oil demand in the second half of 2013." Markets were taken aback because Fed chairman Ben Bernanke had previously hinted in May that the US central bank would begin tapering its bond-buying scheme. "Oil is booming," said Victor Shum, managing director at IHS Purvin and Gertz energy consultancy in Singapore. "The Fed has decided to continue its monetary stimulus programme, so that has boosted equities and the commodities markets globally, and certainly including oil futures here in Asia," he told AFP. Data showing a decline in US crude oil stockpiles -- indicating robust demand in the world's biggest economy -- also supported prices, Shum added. "US crude oil inventories fell more than expected and also gasoline and diesel fuel stocks declined, so and US oil consumption appears to be very strong," he said. The US Department of Energy said US crude inventories tumbled 4.4 million barrels last week, much more than forecasts of 1.2 million barrels.