* Fed to buy $600 bln in treasuries until mid-2011
* Dollar slides versus euro, basket of currencies
* Technicals show price target of $87
* U.S. jobless claims rise more than expected
(Recasts, updates prices, market activity, adds new by-line
changes dateline from previous, LONDON)
By Gene Ramos
NEW YORK, Nov 4 (Reuters) - Oil surged to top a fresh-six
month high over $86 a barrel on Thursday as the the U.S.
Federal Reserve's new monetary stimulus plan to aid the
flagging economy spurred investors risk appetite.
The dollar slumped to a 28-year low against the Australian
currency and a more than nine-month trough versus the euro a
day after the Fed decision to buy $600 billion in U.S. Treasury
bonds, as investors sought better returns elsewhere. []
A weak dollar lifts oil and other dollar-denominated
commodities as it lowers the value of the currency paid to oil
producers and it attracts investments seeking higher gains than
those found in other markets.
The dollar fell further as data showed first-time filings
by Americans for jobless benefits rose more than expected last
week, reflecting a weak labor market. []
"The Fed stimulus will continue to draw investors/traders
to oil as well as most other raw materials in response to the
weak dollar and fears of inflation starting to materialize down
the road," said Dominick Chirichella, senior partner at Energy
Management Institute in New York
U.S. crude for December delivery <CLc1> shot up to an early
high of $86.68 a barrel, the highest since May 3. By 12:10 p.m.
EDT (1610 GMT), it traded up $1.65, or 2 percent, to $86.34.
ICE December Brent <LCOc1> rose $1.55, or 1.8 percent, to
$87.93.
U.S. front-month crude oil has gained 12.7 percent since
Aug. 27, when Federal Reserve Chairman Ben Bernanke signaled
that plans were afoot for another round of quantitative easing.
Correlating inversely, the U.S. dollar's value against a basket
of currencies <.DXY> has fallen 6.5 percent in that period.
Technical indicators point to a bullish target of $87.04,
with support at $84, according to Reuters analyst Wang Tao.
[]
HIGHER PRICE RANGE
Wide anticipation of the Fed's fresh stimulus in October
drove oil prices out of the previous $70-$80 a barrel range.
Top oil exporter Saudi Arabia earlier this week shifted its
price range up to $70-$90 but on Thursday, a senior Gulf source
said prices between $70-$80 is still a fair price.
Oil at $90 would not hold back growth in the world economy,
OPEC Secretary General Abdullah al-Badri said. The comments
added to indications this week that the Organization of the
Petroleum Exporting Countries was unlikely to step in to quell
rising prices.
"It's the dollar, a function of QE2, and some post-election
euphoria and the OPEC green light to $90," said Robert Yawger,
senior vice president, energy futures at MF Global in New York.
Many analysts said fluctuations in the dollar will remain
the principal driver in the oil market, although some have
warned of long-term dangers of QE2 for Asian demand growth.
"We have trouble seeing how much longer the current run can
extend to, given that at some point, higher commodity prices
will lead to even higher inflation and interest rates in
emerging countries," said Edward Meir, analyst at MF Global,
adding that the dollar was currently the "sole driver."
Oil prices remain supported by Wednesday's U.S. government
data showing larger-than-expected drawdowns last week in
distillate and gasoline stocks, even though crude inventories
rose more than forecast.
(Additional reporting by Robert Gibbons in New York, Emma
Farge in London; Alejandro Barbajosa in Singapore; Editing by
Marguerita Choy)
