THE price of oil rose yesterday on indications that the US economy still needs the Federal Reserve to maintain its current stimulus measures.
Benchmark oil for July delivery rose 48 cents to US$93.61 a barrel in New York. That marked a reversal of Wednesday's sentiment, when oil fell US$1.88 on concerns the Fed would taper it stimulus program.
The government said the economy grew at 2.4 percent in the first quarter, slightly slower than initially estimated. Also, the number of Americans seeking unemployment aid rose last week, a sign layoffs have increased.
That makes it more likely the Fed will continue buying US$85 billion of bonds each month in an effort to keep interest rates low and encourage borrowing, lending and investing. That environment has helped make oil a more attractive investment than low-yielding options such as bonds.
Meanwhile, the US Energy Department's Energy Information Administration said the nation's supply of oil rose last week by 3 million barrels to 397.6 million barrels, the highest level since the government started collecting the data in 1978. But gasoline supplies fell by 1.5 million barrels just ahead of the Memorial Day weekend. That was twice the drop analysts expected and indicated that demand picked up during what is considered the start of peak driving season.
Today ministers from the Organization of the Petroleum Exporting Countries will meet in Vienna to discuss, among other things, production levels. But more complex issues also face OPEC, including the rise of shale oil production in the US The Paris-based International Energy Agency says total production could top 9 million barrels a day by 2018, which would mean near self-sufficiency for the US as well as significantly less dependence on OPEC imports.
Brent crude, a benchmark for many international oil varieties, fell 24 cents to US$102.19 a barrel on the ICE Futures exchange in London.
In other energy futures trading on the New York Mercantile Exchange:
- Wholesale gasoline rose 1 cents to US$2.81 a gallon.
- Heating oil fell 3 cents to US$2.84 per gallon.
- Natural gas shed 16 cents to US$4.02 per 1,000 cubic feet.
