* U.S. Fed says to buy long-term U.S. Treasuries
* U.S dollar falls most since 1985
* U.S. crude oil stocks up 2 mln bbls -EIA
By Fayen Wong
PERTH, March 19 (Reuters) - Oil reversed losses and rose
more than 2 percent to above $49 a barrel on Thursday, after a
surprise move by the Federal Reserve to buy government bonds
revived hopes the battered U.S. economy could soon begin its
recovery.
Analysts said oil's rebound was also bolstered by a sharp
drop in the U.S. dollar, which posted its largest percentage
drop since 1985, as the Fed's move, aimed at resuscitating
lending, prompted a sharp fall in market interest rates.
[]
U.S. light crude for April delivery <CLc1> recouped
previous sessions' losses and rose $1.30 to $49.34 a barrel by
0053 GMT, after having touched $49.83 earlier.
London Brent crude <LCOc1> rose $1.26 to $48.92.
"It's a combination of a drop in the U.S. dollar and the
Fed's move that has pushed up oil prices," said David Moore, a
commodity strategist at the Commonwealth Bank of Australia.
"But I suspect more of it is probably on hopes that U.S.
policy stimulus would help turn the economy around, or at least
stabilise it."
The U.S. Federal Reserve on Wednesday stunned markets by
announcing it would pump another $1 trillion into the ailing
U.S. economy by buying long term government debt for the first
time since the 1960s and by expanding its purchases of mortgage
bonds. []
The move triggered a rally on Wall Street on Wednesday,
while Japan's Nikkei average also rose 0.7 percent in early
trading.
Still, analysts cautioned that a continued weakness in
demand could limit oil's gains in the near term.
Earlier on Wednesday, oil fell after data showed U.S. crude
inventories swelled to the highest level in nearly two years
and the World Bank cut its 2009 forecast for China's economic
growth.
In its weekly report, the U.S. Energy Information
Administration (EIA) said crude oil stocks rose 2.0 million
barrels to 353.3 million last week -- double the increase
forecast by analysts -- while gasoline supplies jumped by 3.2
million barrels, countering forecasts of a 1.2-million-barrel
drop. []
Oil's losses on Wednesday were further exacerbated after
World Bank cut its 2009 economic growth forecast in No. 2
consumer China and said Beijing would undermine its own
medium-term goals if it tried to offset the slowdown by further
boosting investment. []
Slumping demand and rising inventories have helped drag oil
off record highs over $147 a barrel struck in July as the
economic meltdown hit consumption across the globe.
But oil prices, which sank to levels below $35 last month,
have since stabilised in the $40-$50 region, as producer group
OPEC cuts output by 4.2 million barrels per day and vowed on
Sunday to achieve stricter enforcement of existing curbs.
"While some see the possibility of breaking out of this
range to the upside, we maintain that despite OPEC supply cuts
in the making, demand considerations will continue to shape the
path of oil prices this quarter and next," Harry
Tchilinguirian, a senior oil analyst at BNP Paribas, said in a
research note.
(Reporting by Fayen Wong; Editing by Clarence Fernandez)
