LONDON (Reuters) - Oil futures rose above $116 a barrel on Thursday as investors awaited a U.S. Federal Reserve announcement, expected to include more stimulus action to bolster the economy of the world's biggest oil buyer.
Brent's front-month October contract, which expires at the end of Thursday's session, rose 49 cents to $116.45 a barrel at 7:55 a.m. EDT (1155 GMT), after a 56-cent gain the previous session.
U.S. crude edged up 24 cents to $97.25 a barrel.
The Fed appeared set to launch a third round of monetary stimulus, known as quantitative easing, on Thursday. It was also expected to signal a weak U.S. economy may warrant ultra-low interest rates for at least another three years.
"It will be a wait and see day until (Fed chairman) Bernanke speaks. There is at least a 50 percent chance that we will see a third quantitative easing," said Filip Petersson, commodity strategist at SEB in Sweden.
"I think we will see a QE 3 but not a strategic release because it would violate the point of them. But I can see the political temptation to do it."
The Fed is expected to release its policy announcement at 12:30 p.m. EDT (1630 GMT) on Thursday, at the end of a two-day meeting. Chairman Ben Bernanke will hold a news conference about two hours later.
Markets, including oil, were also settling down "after yesterday's ECB euphoria", and were now waiting for U.S. data, said Rob Montefusco, oil broker at Sucden Financial in London.
Germany's Constitutional Court gave a green light on Wednesday for the country to ratify the euro zone's new bailout fund and budget pact, helping to boost global stocks and the euro currency.
"Crude is reacting more to economic data than supply concerns," said Thorbj?rn Bak Jensen, oil market analyst at Global Risk Management in Denmark, adding "Confidence in the EU is back and therefore in oil."
If the Fed follows through on more easing, the price reaction is not expected to be large as the potential has already been built into the crude price.
"I do not think it (oil) will jump much, as it has already been rising in anticipation. We'll have a go at $117 but something big must happen to get it above there," said Michael Hewson, market analyst at CMC Markets in London. "Unless QE 3 is bigger than QE 2 then the effect will be limited."
MIDDLE EAST
Heightened awareness of risks surrounding the oil sector in the Middle East, caused by the killing of the U.S. ambassador to Libya and anti-U.S. protests in Libya and Egypt, underpinned prices.
The fury in Egypt and Libya over a U.S. film about Prophet Mohammad has also spread to Yemen as well as Iraq where protests have erupted in Basra and Baghdad.
"General unrest is always going to keep a floor but the geopolitical risk is already priced in," said Hewson at CMC Markets.
President Barack Obama branded the killing of ambassador Christopher Stevens and three other Americans in the Libyan city of Benghazi on Tuesday night as "outrageous" and vowed to track down the perpetrators.
The U.S. military is moving two Navy destroyers toward the Libyan coast, giving the Obama administration flexibility for any future action against Libyan targets, according to a U.S. official.
Brent has rallied more than 30 percent since hitting an 18-month low of $88.49 in late June, driven higher by geopolitical tensions, economic stimulus efforts and supply disruptions.
(Additional reporting by Randy Fabi in Singapore; editing by Andrew Heavens and James Jukwey)
Source: http://news.yahoo.com/oil-prices-firm-ahead-fed-speech-120332691--finance.html
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