BUSINESS
12/18/2013 04:18 EST | Updated 02/17/2014 05:59 EST

Oil ends with gain after drop in oil supplies, decision by Fed to taper stimulus

NEW YORK, N.Y. - The price of oil closed with a small gain Wednesday as the U.S. Federal Reserve decided to start reducing its monetary stimulus and U.S. oil supplies fell for a third straight week.

Benchmark West Texas Intermediate crude for January delivery gained 58 cents to US$97.80 a barrel on the New York Mercantile Exchange after having risen as high as US$98.01 in the morning.

The Federal Reserve decided to reduce its stimulus for the U.S. economy because the job market has shown steady improvement.

Investors had feared such a move because Fed policies have encouraged investment in risky assets like oil. But the notion of a stronger U.S. economy, and more demand for fuel, prevailed on Wednesday.

Meanwhile, the Energy Department said U.S. crude oil supplies fell by 2.9 million barrels last week. Supplies of distillate fuels like diesel fell, while gasoline supplies rose less than expected, helping to boost oil prices.

In London, the February contract for Brent crude, a benchmark for international oils, was up $1.19 to US$109.63 a barrel on the ICE Futures exchange.

In other energy futures trading on Nymex, wholesale gasoline gained five cents to US$2.70 a U.S. gallon (3.79 litres), heating oil added five cents to US$3.01 a gallon and natural gas fell four cents to US$4.25 per 1,000 cubic feet.

(TSX:ECA), (TSX:IMO), (TSX:SU), (TSX:HSE), (NYSE:BP), (NYSE:COP), (NYSE:XOM), (NYSE:CVX), (TSX:CNQ), (TSX:TLM), (TSX:COS), (TSX:CVE)