Oil Supported By QE3 Probability

With most investors believing it's inevitable that Ben Bernanke will institute another round of quantitative easing, it has helped support oil prices which otherwise would probably drop much further than the support it has found in the mid $80 a barrel range.

That has also helped shore up the price of other commodities as well, which would have otherwise plummeted even worse than they have been.

Add to that the enormous upward move of the U.S. dollar, weakening China and Brazil, along with devastated Europe, and you see how the price of commodities, outside of agriculture, should be dropping much more than they have.

But the bears have to be careful after learning from the past that Ben Bernanke's propensity to print money is insatiable, and it's only a matter of when he'll do it again, not if he's going to do it.

That's the great uncertainty in the market which keeps support under oil and other commodity prices. And that's even when everyone knows over the long haul more stimulus won't help the economy at all, but it will give a short-term psychological boost, which will push up the prices of many commodities.

Another support for commodities is in regard to the decision by European leaders to commit to taking further steps to shore up the system. While there are still no particulars there, it remains in the back of the mind of bears who would love to short the market even more, but could easily get hit hard if the Federal Reserve stimulates and Europe clarifies what steps it plans on taking going forward. Those elements, more than anything else, are keeping the price of oil from plummeting to below $50 a barrel at this time.

Unwillingness to bet against the probability of another round of quantitative easing is what's standing between the free fall of the price of most commodities.

That's why with oil the price will probably remain in the $80s until more clarity is revealed.

The next important moment is when Ben Bernanke addresses Congress next week about the state of the economy. Traders and investors will listen closely for any clue on which way things may go in the short term.

Hess (NYSE:HES), Petrobras (NYSE:PBR), PetroChina (NYSE:PTR) Surge on Rising Oil Prices

Hess Corporation (NYSE:HES), Petrobras (NYSE:PBR), PetroChina (NYSE:PTR) were all moving up Thursday on the inflationary measures put in place by the Federal Reserve through QE2, which pushed the broader commodity market up, along with raw materials companies within each sector, including the oil producers.

Commodity prices overall rose, including silver, which increased to over $26 an ounce. Gold prices rose to all-time record highs again, closing in on the $1,400 an ounce mark. Aluminum surged to its highest levels since April.

Light, sweet crude for December delivery settled the trading day up $1.80 a barrel on the New York Mercantile Exchange at $86.49.

Hess Corporation closed at $69.25 Thursday, rising $2.81, or 4.23 percent. Petrobras surged to close at $20.42, gaining $0.96, or 4.93 percent. PetroChina was up to $131.06 at the end of the trading day, rising by $2.25, or 1.75 percent.

Marathon Oil (NYSE:MRO) Profits Up on Higher Prices, Margins

Margins continue to be the story of the earnings season for commodity companies, and that didn't change with Marathon Oil (NYSE:MRO), as they exceeded expectations for earnings and revenue, with higher crude oil prices also being a factor.

A secondary factor for energy companies has been the seasonal increase in demand for fuel, although gas prices have remained somewhat level, and even down from usual levels.

Even so, the demand for fuel has pushed margins up for Marathon, along with the margins in their refinery business, which has helped almost all the energy companies this quarter, who have refining as part of their operations.

Especially helpful for Marathon in the quarter was the lower cost of processing sour crude oil, which is less expensive than light sweet crude.

Earnings for the quarter rose to $709 million, or $1.00 a share. Last year in the same quarter they generated $413 million, or 58 cents a share.

Revenue soared from last year as well, rising to $18.6 billion, up from $13.3 billion. Analysts estimated revenue of $19.7 billion with earnings of 81 cents a share.

Looking ahead, Marathon maintained its full-year production of 390,000 to 410,000 boe a day, with a daily average of 385,000 to 405,000 in the third quarter available for sale.