LONDON, Nov 2 — Oil gained one per cent today to snap its three-day decline, as risk appetite returned to financial markets after the United States (US) Federal Reserve kept benchmark interest rates on hold.
Brent crude futures rose US$1.28, or 1.51 per cent, to US$85.91 a barrel by 0944 GMT, while US West Texas Intermediate crude futures gained US$1.33, or 1.65 per cent, to US$81.77 a barrel.
Oil prices drew support from the US Fed’s decision to keep its benchmark interest rate unchanged at 5.25 per cent to 5.50 per cent at its meeting on Wednesday.
Policymakers struggled to determine whether financial conditions may be tight enough already to control inflation or whether an economy that continues to outperform expectations may need still more restraint.
US inflation held at 3.4 per cent in September for the third consecutive month.
“There is still some way to go to achieve the two per cent target; nonetheless, monetary tightening has been working effectively, and additional rate increase would probably do more harm than good,” Tamas Varga, analyst at broker PVM, said.
Meanwhile, in Europe, a contraction in manufacturing activity in the eurozone deepened in October, with the Purchasing Managers’ Index (PMI) falling by 0.3 points on the month to 43.1. A score of below 50 signals contraction.
A Bank of England meeting later today is expected to result in interest rates being held steady.
Investors will also watch for developments in the Middle East, which has kept oil markets on edge as a wider conflict could disrupt oil supplies around the region.
Fighting raged on around Gaza City on Thursday as advancing Israeli tanks and troops encountered fierce resistance from Hamas militants.