Singapore: Oil prices climbed higher in Asian trade Wednesday ahead of an expected fresh cut in US interest rates, dealers said.
Prices were also getting support from expectations that Ooec will leave current production quotas unchanged when the 13-member oil cartel meets in Vienna on Friday for a crucial meeting about its output levels, they said.
In morning trade, New York’s main contract, light sweet crude for March delivery, rose 77 cents to $92.41 a barrel from its close of $91.64 Tuesday on the New York Mercantile Exchange.
Brent North Sea crude for March delivery was 57 cents higher at $92.57 a barrel.
Analysts expected the US Federal Reserve to cut interest rates again at the conclusion of its two-day policy meeting that began Tuesday.
A decision was expected Wednesday at about 1915 GMT.
Whether the expected rate cut would shore up the US economy -- and therefore prevent slowing energy demand -- will not be known immediately, said Justin Wilks, director of trading and operations with Global Commodities, an Australian commodity fund manager based in Adelaide.
“The rate cuts take a few months to play into the market. We just have to wait and see,” he said.
“Definitely it would appear there is a bit of sentiment towards a possible US recession,” said Wilks.
“The view out there was the 0.75 percentage point cut we had last week looked a little bit panicky. They might follow up with another cut.”
The rate is currently 3.5% after last week’s emergency cut, a move aimed at calming global financial markets roiled by growing fears of a recession in the world’s biggest economy.
Oil traders are watching the Fed’s moves closely because the US is the world’s largest energy user and a slowdown in US economic growth could dent oil demand.
“Equity market movements, economic growth expectations and speculation over future monetary policy measures are continuing to set the tone of trading in the market,” Barclays Capital analyst Kevin Norrish said earlier.
Oil prices have recently reacted to gyrations on global equity markets, and are off their early January historic highs of $100.09 for New York’s light sweet crude and $98.50 for Brent.
Dealers also expect the Organisation of the Petroleum Exporting Countries (Opec) to maintain existing output quotas at their Friday meeting.
“I can’t see why they would cut. You would think they will be happy with these prices,” said Wilks.
Opec’s members together pump 40 percent of the world’s oil.
“The price is being affected not by the fundamentals of the supply and demand but by other factors and therefore there will be no reason for us to suggest another intervention at this stage,” Nigeria’s Junior Petroleum Minister Odein Ajumogobia said on Tuesday.
Ajumogobia, whose country is a member of Opec, said “the main factor driving the prices is speculation”.