OIL prices rose yesterday ahead of a Federal Reserve meeting as traders bet an improving US economy will boost demand.
Benchmark oil for April delivery was up 63 cents to US$106.97 a barrel in afternoon trading on the New York Mercantile Exchange. It hit a low of US$105.67 earlier in the day.
In London, Brent crude was up US$1.03 at US$126.37 per barrel on the ICE Futures exchange.
A third straight month of strong US jobs growth in February has bolstered investor confidence that the recovery in the world's biggest economy is strengthening and will eventually increase demand for crude.
The Commerce Department said yesterday that Americans stepped up spending on retail goods in February, evidence that a stronger job market is boosting the economy. Retail sales increased 1.1 percent last month - the biggest gain since September.
The dollar extended gains after the retail sales report.
The Federal Reserve is scheduled to hold a one-day policy meeting later yesterday, and the oil market will be watching closely for any hint the central bank is considering stimulus measures to boost economic growth.
Meanwhile, the American Petroleum Institute is expected to release its weekly report on inventories later yesterday. That precedes the report by the US Department of Energy, due Wednesday.
Analysts are eyeing the possibility that global crude producers won't be able to boost output enough to match demand if Iran's 4 million barrels a day of production is cut.
"Global spare capacity has been dwindling, and crude demand is about to start rising seasonally," said Citigroup, which expects Brent to average US$130 in the third quarter. "Recent developments point to higher oil prices to come and the odds of a spike to new peaks rises."
Crude has jumped from US$96 a barrel last month amid investor concern that growing tensions over Iran's nuclear program could spark a military conflict that disrupts global crude supplies.
In other energy trading in New York, prices for natural gas prices hit a fresh 10-year low yesterday as balmy weather stretched across much of the US, keeping demand weak as supplies continued to bulge.
Natural gas dropped 4 cents, or 2 percent, to US$2.33 per 1,000 cubic feet in New York trading. Earlier, it hit US$2.22 per 1,000 cubic feet, the lowest price since 2002.
Heating oil futures rose 3 cents to US$3.27 per gallon and gasoline futures increased by 4 cents to US$3.36 per gallon.
Source:shanghaidaily