Investing.com - Crude oil futures traded higher during U.S. afternoon trade Thursday, after China’s central bank surprisingly cut its benchmark interest rate to stimulate growth in the world’s second largest economy.
In addition, oil prices climbed on the back of growing hopes for further easing measures by the Federal Reserve as well as renewed concerns over a disruption to Iranian oil supplies.
On the New York Mercantile Exchange, light sweet crude futures for delivery in July traded at USD85.41 a barrel during U.S. afternoon trade, adding 0.43%.
It earlier rose by as much as 1.8% to trade at USD86.56 a barrel, the highest since June 1.
Oil prices accelerated gains after the People’s Bank of China unexpectedly announced that it had lowered its benchmark interest rate by 0.25% to 6.31% from 6.66% effective June 8.
It was the first rate cut since December 2008, when the world economy was in the midst of the financial crisis.
China is the world's second largest oil consumer after the U.S. and has been the engine of strengthening demand.
Growing expectations the Federal Reserve will consider more action to stimulate growth in the U.S. further supported prices.
Hopes for such action were lifted by comments from Fed Vice chair Janet Yellen, who said in a speech Wednesday that the central bank could further ease monetary conditions in response to ongoing housing problems, a weak jobs market and the escalating euro zone crisis.
Attention now shifts to a Congressional testimony by Federal Reserve Chairman Ben Bernanke later in the day about the state of the U.S. economy. Traders will be looking for any hints that the Fed is considering more monetary stimulus.
The Wall Street Journal, citing interviews and Fed speeches, reported late Tuesday that the Fed was mulling new measures to stimulate growth in the world’s largest economy.
Markets showed a muted reaction to a report from the U.S. Department of Labor showing that the number of people who filed for unemployment assistance in the U.S. last week fell by 12,000 to 377,000, broadly in line with market expectations.
Meanwhile, a warning from Iran over talks about its nuclear program that are scheduled for later this month provided further support.
The nation’s envoy to the International Atomic Energy Agency said Wednesday that Iran will “never suspend” its enrichment of uranium and “will not permit our national security to be jeopardized”.
The comments come ahead of talks scheduled for June 18 and 19 in Moscow between Iran and Western powers.
Iran and Western nations have been locked in an ongoing stand-off over Tehran's nuclear program. The Islamic Republic produces about 3.5 million barrels of oil a day, making it the second-largest oil producer in the Organization of Petroleum Exporting Countries.
Also Thursday, Spain successfully sold EUR2.07 billion of bonds, slightly more than the targeted amount, in an auction which met with solid investor demand, but saw borrowing costs rise.
Concerns about Spain’s banks have grown since Bankia, the country’s fourth-largest lender, said last month it needed EUR19 billion in state aid to shore itself up against bad loans.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for July delivery was up 0.02% to trade at 100.69 a barrel, with the spread between the Brent and crude contracts standing at USD15.28.