by Qiao Jihong
NEW YORK, Oct. 2 (Xinhua) -- International oil prices will continue to be caught between the push of aggressive central bank stimulus and Middle East unrest, and the pull of a gloomy growth outlook, analysts say.
U.S. crude started the last quarter with a moderate gain on Monday after closing the third quarter with a big gain.
U.S. crude benchmark WTI closed at 92.48 dollars a barrel on Monday, up 29 cents from Friday's settlement. In the third quarter, it surged 7.84 percent. Brent crude now stands at 112.19 dollars a barrel, surging 15.26 percent from the beginning of the previous quarter.
EASING MONEY TO FUEL GAINS
Oil prices were boosted in the third quarter largely by the central banks' moves. In September, central banks across the world adopted aggressive monetary policies, which created an easing environment for markets.0 The European Central Bank unveiled an "unlimited" bond buying plan to provide an "effective backstop" to the struggling eurozone bond markets.
The U.S. Federal Reserve launched QE3 with a commitment to buy mortgage assets for an "indefinite" period until labor market conditions improve.
The Bank of Japan also expanded the size of its asset purchase program to boost the country's economy. Several central banks of emerging countries, including Brazil and India, also undertook easing measures, with a "domino effect" expected to occur among other central banks.
Although investors remained cautious about the economic boosting effect of the new stimulus measures, John Praveen, the chief investment strategist at Prudential Investments Advisors LLC, said the liquidity and "interest rate tail winds" would fuel solid gains in the financial markets in the short term.
MIDDLE EAST WEIGHS
The rising tension between Iran and the West, and the unrest in the Middle East region would further lift oil prices, analysts said.
Goldman Sachs analysts favored commodities amid other asset classes, predicting returns of 18.2 percent in the next 12 months for the S&P GSCI Enhanced Commodity Index. Energy was expected to be the top gainer.
The European Union's embargo on Iran's oil exports, which took effect on July 1, has also led to supply worries.
The tension between the West and Tehran over the latter's nuclear program intensified after the U.S. Treasury announced new sanctions against Iran's state-owned oil companies.
Moreover, violent protests against the United States in some Middle East countries also fueled fears of instability in the oil-rich region.
Goldman Sachs said in a research note to clients that sanctions against Iran had tightened supplies and even a modest global growth assumption would be enough to keep that tightness into the second half of the year.
ECONOMIC CONCERNS PARE GAINS
However, slowing global growth, lingering uncertainties in the eurozone and fears of a U.S. fiscal cliff remained headwinds for oil markets.
The eurozone economy contracted in the second quarter and is on track to tighten again in the third quarter. The latest unemployment rate in the 17-nation bloc hit a record high 11.4 percent, flagging a recession.
There is still no solution in sight to the lingering eurozone debt crisis. Carl B. Weinberg, chief economist at High Frequency Economics, wrote in research note, "We therefore must expect the economy, the banking sector and the sovereign debt markets to continue to decay, in a pattern more akin to the Great Depression of the 1930s than to any business cycle in our lifetime."
Across the Atlantic, the U.S. economy continues to limp along at a below-trend pace, with unemployment still staying above 8 percent. Risks loom of a fiscal cliff, which would be a great shock to the already weakening economy.
To add to the woes, growth in the emerging economies have also slowed. Although government stimulus plans could help emerging markets bounce a little in the fourth quarter, they will still face rising pressure from climbing costs and slowing growth.