* Caution before U.S. Federal Reserve decision on Wednesday
* OPEC ministers talk of prices acceptable up to $90
* Technicals show oil could rise towards $84.55 []
* Coming up: API oil inventory data, 2030 GMT
(Updates prices, comment)
By Christopher Johnson
LONDON, Nov 2 (Reuters) - Oil rose on Tuesday ahead of an
expected decision by the Federal Reserve to pump more money into
the U.S. economy and after an apparent upward shift in price
tolerance among oil producing countries.
The market was expected to trade in a tight range until
Wednesday's decision by the U.S. Federal Reserve, which analysts
believe will be to start a second round of "quantitative
easing," also known as QE2.
The U.S. central bank is widely expected to decide to buy
around $500 billion in longer-term Treasuries over about six
months in a move that could encourage more dollar weakness.
The dollar fell against a basket of currencies on Tuesday
<.DXY>, adding extra support to oil and commodities. A fall in
the dollar makes dollar-denominated commodities cheaper. []
U.S. crude for December <CLc1> rose 36 cents to $83.31 a
barrel at 1034 GMT, adding to gains of nearly 2 percent the
previous session. ICE Brent <LCOc1> climbed 17 cents to $84.79.
Traders and analysts were wary ahead of the Fed's move,
expected at the end of its two-day meeting starting Tuesday.
"We would be very cautious about going long at current
levels in practically any of the markets, as we would want to
wait and get this week's critical economic and political events
behind us," said Edward Meir, senior commodity analyst at
brokers MF Global.
Commerzbank commodities analyst Carsten Fritsch agreed.
"The main story is the what the Fed will do tomorrow and
what it will do to the dollar," Fritsch said. "The risk is that
the markets are disappointed in the scale of QE2, that it is
less than some people are expecting."
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a graphic of returns from a range of assets since the
Fed began hinting it would launch a new round of QE, click:
http://link.reuters.com/kyw48p
For a graphic of commodities so far this year, click:
http://link.reuters.com/kew48n
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
"SIGNIFICANT ESCALATION"
The Fed's pending announcement overshadowed comments from
Saudi Arabia's Oil Minister Ali al-Naimi on Monday that
consumers would be comfortable with oil prices rising as high as
$90 a barrel. []
Qatar, another member of the Organization of the Petroleum
Exporting Countries, also said a $70 to $90 price range would be
reasonable, but not anything higher. []
For much of this year, crude oil prices have been stuck
between $70 and $80 per barrel, a range that OPEC has said for
the last two years it has seen as ideal for both producers and
consumers.
But on Monday Saudi Arabia appeared to raise this range.
Naimi's comments were understood to signal the world's top
oil exporter could allow prices to climb as high as $90.
"It was interpreted as a significant escalation in the price
band the Saudis are envisioning," Meir said.
Industry group the American Petroleum Institute will issue
its latest U.S. crude oil inventory data later on Tuesday.
Analysts expect stockpiles in the world's largest energy
consumer to have risen for the fourth time in five weeks last
week as imports increased. []
(Additional reporting by Randy Fabi in Singapore; editing by
James Jukwey)
