Crude prices rose on Wednesday as the Federal Reserve Chairman Ben Bernanke hinted new monetary stimulus and U.S. crude inventories fell last week larger than expected.
In his twice-a-year economic report to Congress, Bernanke left the door open to a further stimulus, in efforts to boost the sluggish economy. Bernanke said the recent economic weakness may persist and deflation risk may reemerge, implying a need for additional policy support.
Bernanke said, "One option would be to provide more explicit guidance about the period over which the federal funds rate and the balance sheet would remain at their current levels. Another approach would be to initiate more securities purchases or to increase the average maturity of our holdings."
A possible QE3 encouraged the investors. U.S. stocks jumped after Bernanke's comments. Meanwhile, the dollar tumbled, resulting in a 0.8-percent decline in the dollar index. A cheaper dollar made all commodities priced in greenback more attractive, including oil, gold and silver.
And the U.S. Energy Information Administration reported Wednesday that U.S. crude inventories dropped 3.1 million barrels in the week ending July 8, far beyond a 1.8-million decline expected by the market and registering the sixth straight weekly draw. The gasoline stocks also scaled back 800,000 barrels.
To top to that, China's GDP rose 9.6 percent year-on-year in the first half 2011, easing the worries about a "hard landing" in China. And in the second quarter, GDP rose by 9.5 percent, tapering off slightly from the 9.7-percent growth in the previous quarter, still beating the estimates, lifting the market sentiment.
Light, sweet crude for August delivery gained 62 cents, or 0.64 percent to settle at 98.05 dollars a barrel on the New York Mercantile Exchange. In London, Brent crude for August delivery also rose and last traded around 119 dollars a barrel.
