Oil rose for a third day as traders searched for clues to whether the Federal Reserve may be considering additional measures to spur economic growth.
Benchmark oil rose 73 cents to finish at US$85.02 per barrel Wednesday in New York. The last time U.S. crude gained for three straight days was late April.
Traders are anticipating remarks about the economy from Federal Reserve Chairman Ben Bernanke on Thursday when he testifies before Congress. Of note will be Bernanke's take on the weak jobs report for May. Just 69,000 jobs were created last month, the fewest in a year.
"If he thinks it's bad and his mandate is full employment, the odds of a stimulus go up," Price Futures Group analyst Phil Flynn said.
Bernanke could endorse a third round of bond buying by the Fed in an effort to push already low long-term interest rates even lower. The Fed purchased $2.3 trillion in Treasury bonds and mortgage-backed securities in the past three years in an effort to push interest rates lower.
In September, the Fed began a $400 billion program dubbed Operation Twist by which it sold $400 billion in short-term securities and replaced them with long-term securities in an effort to put more downward pressure on long-term rates. The program is scheduled to end in June, but could be extended.
Recent comments from Federal Bank officials indicate the door may be open for additional stimulus. In a speech Tuesday in Fort Lauderdale, Fla., Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said that additional measures to support the economy will need to be considered if modest economic growth "is no longer realistic." The Fed's next meeting is later this month.
The Fed's previous stimulus efforts boosted oil prices. The lower interest rates reduced the value of the dollar against other currencies. Commodities like oil are priced in dollars so the weaker dollar made them cheaper for traders who used other currencies.
Concerns about the slowing global economy and its impact on future demand for oil and other energy products have hurt oil. The price has fallen nearly 23 per cent from the year's high of $109.77 per barrel in February. Discouraging economic data from the U.S., China and Europe last week pushed the price down $7.63, or 8.4 per cent. Oil has gained nearly $2 this week.
There also is speculation that European politicians will take steps to promote growth as they try to find a solution to their financial problems. The debt crisis has hurt the region's economy and has affected U.S. companies that do business in Europe.
Meanwhile, the U.S. oil supply dropped slightly last week to 384.6 million barrels, the first decline since mid-March. The Energy Department said that crude supplies still remain 4.2 per cent above the year-ago level.
Brent crude, which is used to price varieties of international oil, gained $1.80 to end at $100.64 per barrel in London.
In other trading, heating oil rose 3.81 cents to end at $2.6717 per gallon and gasoline increased 0.56 cent to $2.6903 per gallon. Natural gas dropped 2.5 cents to $2.421 per 1,000 cubic feet.
At the pump, the national average for a gallon of gasoline fell half a cent overnight to $3.565, according to AAA, Wright Express and the Oil Price Information Service. That's about 21 cents less than a month ago.
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