By the OGJ Online Staff
HOUSTON, Aug. 22 -- The Federal Reserve's decision to cut US interest rates to the lowest level since 1994 raised prices for oil and refined products in international futures markets Tuesday.
Traders speculated that the 0.25% reduction would help stimulate the US economy and stem the declining demand for petroleum.
The expiring September contract for benchmark US sweet, light crudes jumped 73¢ to $27.91/bbl on the New York Mercantile Exchange, while the October contract gained 49¢ to $26.72/bbl.
Oil markets got another boost from a bullish report of declining US petroleum inventories, issued by the American Petroleum Institute after the close of trading. The API reported US oil stocks fell by 5.4 million bbl last week, while US gasoline inventories dropped by 3.1 million bbl. Distillate inventories, including home heating oil, were down by 856,000 bbl.
As a result of that report, prices for the October and November oil futures contracts continued to climb in after-hours electronic trading to $27.15/bbl and $26.89/bbl, respectively.
Unleaded gasoline for September delivery surged 4.1¢ to78.41¢/gal during Tuesday's trading session on the NYMEX. Home heating oil for the same month rose 1.64¢ to 72.99¢/gal. However, the September natural gas contract dipped 2.1¢ to $3.17/Mcf.
The strong performance of NYMEX gasoline futures helped pull up North Sea Brent oil prices on the International Petroleum Exchange in London. Traders decided US demand for gasoline must be booming, especially with the drop in retail pump prices for several weeks prior to the traditional peak in that market.
The October contract for Brent crude gained 44¢ to $25.49/bbl on the IPE. The September natural gas contract also increased by 7.1¢ to the equivalent of $2.53/Mcf.
The average price for the Organization of Petroleum Exporting Countries' basket of seven crudes soared by 80¢ to $24.28/bbl Tuesday.