CRANBURY, N.J. (DTN) — New York Mercantile Exchange
nearby delivery oil futures rallied overnight, extending Wednesday’s late
afternoon burst higher following the announcement by the Federal Open Market
Committee that they would maintain ultra
-low interest rates through the end of
Reserve said they would keep the federal funds rate between zero and 0.25%
through the end of 2014. Previously, the Fed announced it would keep the
ultra-low interest rate through the middle of 2013, with many market followers
anticipating the possibility of extending that policy through the middle of
2014. The longer duration was a surprise to many, immediately weakening the
U.S. dollar in spot index trading while rallying NYMEX crude and RBOB futures.
The S&P 500 surged to a fresh six-month high on the announcement.
The low interest
rate, which began in late 2008 to combat the credit crisis, is aimed at
spurring economic activity, with the latest move targeting high unemployment.
The Fed believes the jobless rate will remain high for an extended period of
time, with the central bank looking to promote higher job growth with low
However, the low
interest rate has an inflationary impact upon commodities such as oil, while
investors will also look to stave off dollar depreciation through investments
in commodities and equities, as recent history shows.
Also bullish for
equities and commodities were indications by the Fed that they might again buy
bonds to spur economic activity, which is referred to as quantitative easing.
Previous QE efforts have spurred commodities and equities higher, although the
policy has many critics.
The U.S. dollar
was lower in spot index trading this morning while the S&P 500 was moving
higher in futures trading. NYMEX oil and the dollar typically move in opposing
directions, while the crude contract has tracked closely with the S&P 500.
crude futures posted a one-week spot high at $101.00 bbl, with the February
heating oil contract also registering a one-week high, reaching $3.0632 gallon.
February RBOB futures matched Wednesday’s
$2.8597 gallon better than three-month spot high in