An unexpected drop in US interest rates and growing consensus that the Organization of Petroleum Exporting Countries will soon cut production 1-2 million b/d pushed up oil futures prices on international markets Wednesday.
Lower interest rates should support the slowing US economy and buoy demand for petroleum, analysts said.
The February contract for benchmark US light, sweet crudes rose 79� to $28/bbl on the New York Mercantile Exchange, where the March contract also gained 75� to $27.27/bbl.
In London, the February contract for North Sea Brent closed at $25.03/bbl, up 73� for the day, after trading as high as $25.30/bbl on the International Petroleum Exchange.
Only the day before, London analysts�skeptical of OPEC�s pre-meeting promises�were saying IPE oil futures would not soon cross the $25/bbl threshold again. But they now say indications that Kuwait and Saudi Arabia are in agreement make a production cut almost a foregone conclusion at the cartel�s meeting later this month.
Meanwhile, expectations of warmer weather in key US markets caused home heating oil to dip 0.6� to 85.98�/gal on the NYMEX. Unleaded gasoline for the same month was up 1.5� to 81�/gal.
The February contract for natural gas also lost 17.5� to $8.19/Mcf on the NYMEX because of the expected warming trend to normal or slightly above normal temperatures across most of the country during January.
However, the American Gas Association reported Wednesday that 209 bcf of gas was withdrawn from US storage last week, slightly more than analysts expected. US gas storage is 708 bcf, a record low for this point in the heating season and 29% below the level of a year ago.
In London, the February natural gas contract gained 4� to the equivalent of $3.86/Mcf on the IPE.
On the Singapore exchange, the February contract for Brent crude rose 73� to $25.03/bbl. The March contract rose 76� to $24.96.
The average price for OPEC�s basket of seven crudes gained 21� to $22.61/bbl on Wednesday.
