Oil price rises on hopes Fed will boost US economy
The price of oil rose Tuesday on hopes that the Federal Reserve will announce new measures to stimulate the US economy.
West Texas Intermediate crude rose by 79 cents to US$84.06 per barrel by midday on the New York Mercantile Exchange.
Brent crude, which helps set the price for oil imported into the US, added 4 cents to US$96.09 in London.
The Fed holds a two-day meeting that ends today, and in the past it has taken action to encourage Americans to spend and borrow. Many analysts think the struggles of the US economy and Europe's debt crisis will compel the Fed to say or unveil something to try to boost confidence.
Any sign that the Fed is willing to take action could lift oil prices, which have fallen sharply during the last six weeks over fears that growth in the global economy will stall.
"The market is building on a little optimism that they'll do something," said Peter Donovan, an oil broker with Vantage Trading in New York.
Concerns about Iran's nuclear programme also are pushing oil prices higher, Donovan said. Negotiations between six world powers and Iran - a major oil producer - appear to have accomplished little this week in Moscow. That increases the likelihood of a European oil embargo in July. And some analysts are concerned the matter will only be settled by an armed conflict in the Middle East.
Either action - an embargo or an attack on Iran - could cut into the world's supply of oil.
Even before its sudden drop, the price of oil had declined from a high this year of US$109.77 on February 24.
US gasolene prices continue to follow oil lower. yesterday, the national average fell below US$3.50 per gallon (92 cents a litre) for the first time since February 10, according to auto club AAA, Wright Express and Oil Price Information Service.
The average price of gasolene in the US has dropped 44 cents since peaking at US$3.94 in early April. Along with the impact of lower crude prices, there's a greater supply of gasolene. Refineries tend to increase stockpiles of summer gasolene after Memorial Day.
In other futures trading, heating oil added 2.2 cents to US$2.64 per gallon while wholesale gasolene fell by 1.2 cents to US$2.649 per gallon. Natural gas lost 5.2 cents to US$2.583 per 1,000 cubic feet.