BUSINESS

Oil above US$97 amid positive economic data, signals Fed stimulus still needed

06/27/2013 05:01 EDT | Updated 08/27/2013 05:12 EDT
NEW YORK, N.Y. - The price of oil rose above US$97 a barrel Thursday as the latest U.S. economic data raised hopes for an increase in gasoline demand but suggested the Federal Reserve can wait to pull back on its current stimulus measures.

The number of Americans seeking unemployment benefits fell by 9,000 to a seasonally adjusted 346,000 last week, evidence that the job market is still improving modestly. Steady job gains could help the economy expand later this year and would mean more people driving to work.

But the U.S. Commerce Department revised downward its estimate of consumer spending for three of the year's first four months. That could signal weaker-than-expected growth in the April-June quarter. A day earlier the government downgraded its estimate for growth in the January-March quarter to a 1.8 per cent annual rate, from a previous estimate of 2.4 per cent. The main reason for the revision was consumers spent less than initially estimated.

Tepid growth could keep the Federal Reserve from scaling back its program of bond purchases later this year. The bond purchases have helped keep interest rates low, and encouraged investors to seek better returns in stocks and oil futures.

Benchmark West Texas Intermediate crude for August delivery rose $1.55, or 1.6 per cent, to finish at US$97.05 a barrel on the New York Mercantile Exchange.

Oil has gained nearly four per cent this week, after a sharp drop last Thursday and Friday when the Fed signalled it could start curtailing the bond-buying program as early as September if the economy improves enough.

Natural gas futures moved in the opposite direction after the U.S. Energy Department said supplies rose more than expected last week. Natural gas fell 16 cents, or 4.1 per cent, to end at US$3.58 per 1,000 cubic feet. That's the lowest level since March 6.

Brent crude, which is used to set prices for oil used by many U.S. refineries to make gasoline, rose $1.16 to finish at US$102.82 a barrel.

In other energy futures trading on the Nymex, heating oil rose four cents to end at US$2.89 a U.S. gallon (3.79 litres) and wholesale gasoline rose one cent to finish at US$2.74 a gallon.

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