11/14/2013 03:55 EST | Updated 01/23/2014 06:58 EST

Oil rises as Fed chair nominee backs Yellen's backs stimulus policy

Crude oil prices erased sharp early losses and closed down only marginally Thursday as a Fed chair nominee Janet Yellen indicated that she plans to keep her predecessor's economic stimulus in place pending further improvement in the U.S. economy.

Yellen testified Thursday before the Senate banking committee, which is considering her nomination to be the next chairman of the Federal Reserve, replacing Ben Bernanke.

She said the U.S. economy has regained ground lost to Great Recession but still needs the Fed's support because unemployment remains too high at 7.3 per cent. That support has encouraged investment in riskier assets such as stocks and oil.

Yellen's comments helped reverse sharp morning losses in oil, partly caused by a government report showing the eighth straight weekly increase in the U.S. supply of crude oil.

At the close, benchmark West Texas Intermediate crude for December was down 12 cents at US$93.76 a barrel on the New York Mercantile Exchange. Oil had fallen as low as US$92.51 in the morning.

The Nymex benchmark is down by about eight per cent over the past month and traders say further declines are likely as U.S. crude output keeps rising.

Data from the Energy Department showed that in October, for the first time since 1995, the U.S. produced more crude oil than it imported — 7.7 million barrels a day against 7.6 million barrels a day.

"This is a trend that is likely to continue next year — crude oil production looks set to grow to 8.9 million barrels per day by the end of 2014, while crude oil imports are expected to drop to 5.8 million barrels per day," said analysts at Commerzbank in Frankfurt in a note to clients.

Energy Department data for the week ended Nov. 8 showed that crude oil supplies rose by 2.6 million barrels. Analysts expected an increase of 1.8 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Brent crude, the international benchmark, rose $1.42 to US$108.54 a barrel on the ICE exchange in London. Besides the Yellen comments, Brent was boosted by protests and disruptions at refineries in Libya, a vital supplier to Europe.

In other energy futures trading on Nymex, wholesale gasoline added six cents to US$2.68 a U.S. gallon (3.79 litres), heating oil added three cents to US$2.93 a gallon and natural gas rose four cents to US$3.61 per 1,000 cubic feet.