By Qiao Jihong
NEW YORK, Aug. 31 (Xinhua) -- U.S. crude rose 1.85 dollars to settle at 96.47 dollars on the last day of August, posting a monthly gain of 9.6 percent, the biggest percentage gain since October 2011.
Brent crude also closed up 1.92 dollars at 114.57 dollars a barrel, surging 9.2 percent in August, the biggest rise since February.
Analysts say crude prices could go further up and U.S. crude benchmark WTI might go back to 100 dollars a barrel in a near term as central banks are expected to take stimulus polices and supplies concerns could linger.
NEW EASINGS ON THE WAY
Expectations of a third round of quantitative easing have been building since the release of the disappointing July non-farm payroll report. The minutes of the August 1 FOMC meeting appeared to strengthen the hopes.
From the minute's key sentence of "many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery", investors got the hints on Fed's rising willingness to adopt QE3.
Again, in the much awaited speech on Friday at Jackson Hole, Federal Reserve Chairman Ben Bernanke made a strong case for the Fed undertaking QE3 in the near-term by defending the Fed's use and effectiveness of non-traditional policy tools and arguing that the central bank "should not rule out the further use of such policies if economic conditions warrant."
"It appears that the Fed is now certain to undertake QE3. The question is When? In September or sometime in Q4?" John Praveen, Chief Investment Strategist of Prudential International Investments Advisers said.
According to experiences of last two rounds of QE, commodities prices would rise sharply if the Fed adopted new stimulus policies, said Raymond Carbone, president of oil brokerage of Paramount Options.
Besides, Carbone thought the European Central Bank would follow with boosting policies, which could lift the crude prices further up.
IRAN WEIGHS ON SUPPLIES
Recently, supplies concerns including production declines in North Sea caused by heavy maintenance, Hurricane Isaac hitting in the Gulf of Mexico and geopolitical tensions have been the main supportive factors to crude prices. Among all the threats to global oil supplies, Iran was the "obvious elephant".
European embargo on Iranian oil exports took full effect on July 1, when crude prices started to go on the rising path after a two-month long declines.
According to estimates of the International Energy Agency (IEA), the embargo will cause 1-million-barrel decline in Iran's daily oil supplies. The statistic of BNP Paribas showed that Iran is currently producing 2.9 million barrels per day, much below than the 3.4 million barrels per day in January this year.
"As Iran loses its position as Organization of Petroleum Exporting Countries's second largest producer to Iraq, it is hard to envisage that it will sit 'quietly' as more of its oil comes under embargo," Harry Tchilinguirian and Gareth Lewis-Davies, oil strategists of BNP Paribas wrote in a comment.
They thought there was great room for geopolitical tension to spike, which would add to existing concerns related to on-going supply outages in non OPEC countries such as Syria, Yemen and Sudan. In addition, OPEC countries like Libya, Nigeria and Iraq were not immune to domestic instability that regularly threatens supply.
In face of reports saying that Iran was preparing to expand its uranium enrichment program, analysts worried that a military action against Iran could be triggered. "Once there was a military action against Iran, U.S. crude prices could easily go back to three-digit level." said Carbone.
DOWNSIDE RISKS LIMIT
Carbone said there were so many factors that boosted the prices, while the downside risks limit.
Recently, talks about tapping strategic oil reserves caught markets' attention. A potential reserves release could cut oil's rising steam.
The financial ministers of the Group of Seven countries Tuesday expressed concerns about rising oil prices. They said they might call for a reserves release to cope with Iran's exports declines.
But Maria Van Hoeven,the executive director of IEA, a watchdog of 28 western countries' oil reserves, insisted that there was no need for a release. Some European countries like Germany and Italy also opposed to the release ideas.
Carbone also said it will be not an intelligent idea to release oil reserves, because "it will do little to change the prices, and will limit the market flexibility".
Although the White House kept saying it remained an option on the table, analysts thought the decision progress could be long.
But there were still another downside risks for crude prices. Any worse news about the development of European debt crisis or economic growth in China could pose negative impacts on oil prices.
Besides, the driving season is coming to an end. Carbone pointed out, after the coming Labor Day holiday, oil demand tended to decline, which would be bearish to crude prices.