Fed to buy $40 billion in mortgage-related debt per month
* Brent October crude contract expiry on Thursday (Updates throughout with reaction to Fed announcement)
By Robert Gibbons
NEW YORK, Sept 13 (Reuters) - Oil rose on Thursday after the U.S. Federal Reserve launched another stimulus program, this time it will buy $40 billion of mortgage debt per month until the outlook for jobs improves.
In a significant shift in the direction of U.S. monetary policy, the Fed's policymaking committee tied its unconventional bond buying directly to economic conditions.
Oil prices reeled after the statement, initially surging up by $1 and then swinging lower before climbing back into positive territory.
Previous stimulus programs encouraged investors to push money into riskier asset classes including commodities and equities, lifting prices. Analysts cautioned that weak underlying oil demand may not support a sustained rise in prices longer term, however.
"The seemingly open-ended purchase of mortgage-backed securities at $40 billion per month gives the markets the QE3 that had been priced in to a great degree," said John Kilduff, partner at Again Capital LLC in New York.
"The Fed's policy moves will likely push oil prices higher, but you must be mindful that the policy considerations are a reaction to underlying conditions that are not favorable to a robust demand environment for oil, at the same time."
Front-month October Brent crude, which expires on Thursday, traded up 48 cents to $116.44 a barrel at 1:02 p.m. EDT (1702 GMT), while the more actively traded November contract gained 17 cents to trade at $115.50 a barrel.
U.S. crude rose 68 cents to $97.69 a barrel, off earlier highs of $98.58, the highest since $102.72 on May 4.