Speculation that the Fed will announce new steps to boost the economy grew after government reports showed that hiring is still weak while inflation remains in check. Any boost to the economy should increase demand for oil, gasoline and diesel fuel.
Benchmark crude rose US$1.29 to finish at $83.91 per barrel Thursday in New York, the largest increase since April 11. Brent crude, which is used to price international varieties, gained 45 cents to $97.17 per barrel in London. U.S. stock markets also rose.
Meanwhile, many investors are awaiting the outcome of a weekend election that could determine if Greece leaves the euro currency union. A report saying major central banks were preparing for co-ordinated action if the results of the elections on Sunday strain global financial markets gave oil and stocks an extra boost in the afternoon.
The Federal Reserve is scheduled to meet next week. Its latest round of bond purchases concludes at the end of June. Chairman Ben Bernanke said last week that the Fed is ready to act if the financial crisis in Europe threatens the U.S. economy but he didn't indicate that any new steps were on the way.
Europe still is searching for the best solution to its debt crisis. Spain's borrowing costs surged Thursday after a ratings agency downgraded Its credit rating. Italy's borrowing costs also jumped because it could follow Spain in asking for a financial bailout.
In Vienna, ministers of the Organization of the Petroleum Exporting Countries decided to keep a production target of 30 million barrels a day. The decision had been expected. Although some members of OPEC want to reverse a recent sharp decline in oil, others worry that higher oil prices could hurt global economic growth.
Oil has fallen 24 per cent from its peak in late February. Meanwhile, U.S. pump prices have dropped 41 cents from a high of $3.94 per gallon in early April. Some economist hope cheaper gas will boost consumer spending, but so far that isn't happening. The Commerce Department said this week that Americans barely increased spending at stores in April and May.
Natural gas futures soared 31 cents to finish at $2.495 per 1,000 cubic feet, the sharpest gain since Jan. 6, 2010. The Energy Department reported that natural gas in storage grew by 67 billion cubic feet to 2.944 trillion cubic feet for the week ended June 8. That increase was 4 billion cubic feet less than analysts expected.
Rusty Braziel, president of RBN Energy, a consulting company based in Houston, says the report relieved fears that the nation's natural gas storage facilities would reach capacity and prices would plummet further. He sees signs that natural gas drillers have curtailed the dramatic growth in production that sent prices near a 10-year low earlier this year.
At the same time, utilities are burning more natural gas in place of coal, helping to relieve the gas glut a bit. Total inventories are still 29 per cent above the five-year average of 2.278 trillion cubic feet.
Heating oil rose 1.69 cents to end at $2.6278 per gallon and gasoline futures gained 2.1 cents to $2.6764 per gallon.
At the pump, the national average for gas fell less than a penny overnight to $3.532 per gallon, according to AAA, Wright Express and the Oil Price Information Service. The price is nearly 20 cents less than a month ago.Suggest a correction