Oil Prices to Gain This Week as Markets Price in Stimulus

Benchmark oil prices will likely gain this week after poor U.S. jobs numbers increased the likelihood of the Federal Reserve announcing additional stimulus at their policy-setting meeting this week. Weekend data which showed China’s factories running at their weakest pace in 39 months are also positive for crude prices as they raise the possibility of further monetary easing by Beijing.

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“We see some upside for oil this week, with hopes of policy action likely to counter any more weak data ahead of the FOMC meeting,” ANZ analysts wrote in a report today.

“If you see a bigger stimulus announcement” than expected from the Fed “then maybe we will start seeing oil moving up,” Juerg Kiener, MD & CIO at Swiss Asia Capital told CNBC Asia’s "Squawk Box" on Monday. U.S. crude futures will consolidate above the $90 level, Kiener said. “I think the bigger impact will be Middle East…things coming off-stream on the supply side which will move prices.”

Out of ten respondents, six expect prices will rise this week while the remainder forecast a fall, CNBC’s weekly oil sentiment survey showed.

Brent October crude rose 76 cents on Friday to settle at $114.25 a barrel, having swung between $112.34 and $114.65. For the week, Brent slipped 32 cents.

U.S. October crude rose 89 cents to settle at $96.42 a barrel, below the 200-day moving average of $96.62, after trading from $94.08 to $96.74 during the session. For the week, U.S. crude lost only 5 cents.

Money managers raised their net long U.S. crude futures and options positions in the week to September 4th, the Commodity Futures Trading Commission (CFTC) said on Friday.

Andrew Su at Compass Global Markets said that while investors have decided that further stimulus from the Federal Reserve is now a done deal there was still scope for disappointment.

“We are not so certain and believe that the chances of a significant decline in asset prices across commodities and equities has now increased dramatically as the risk of disappointment has risen exponentially,” Su wrote in a report Monday.

“Investors have now been swept away on a wave of QE3 expectationthat has completely overshadowed the fundamentals of high inventories and weak demand for product in the United States. We remain (on the) sidelines until a break of $92 or $98 and (will) continue to employ a sell on rallies strategy within this range.”

—By CNBC's Sri Jegarajah