Oil prices gain on US economic optimism after Fed move
New York: Oil prices rose Thursday as investors concluded that the Federal Reserve`s move to trim stimulus was a sign of the improving US economy.
US oil benchmark West Texas Intermediate for January delivery rose 97 cents to close at USD 98.77 a barrel, the highest level in nearly two months.
European benchmark Brent oil for February delivery increased 66 cents to USD 110.29 a barrel in London trade.
Analysts said there was little oil-market news to guide price action, but said investors were heartened by the Fed`s decision Wednesday to trim its monthly asset purchases by USD 10 billion to USD 75 billion starting in January. The Fed cited "growing underlying strength in the broader economy."
The stimulus scaleback "means the economy is growing at a good pace," said David Bouckhout, senior commodity strategist at TD Securities.
"Today`s strength was based on the fact that the economy is looking better and that should translate into better demand for crude."
Addison Armstrong, senior director of market research for Tradition Energy, said improving economic conditions should set a "floor" on oil prices. But he said the oil market still faces some pressure from high production as producers continue to drill aggressively in response to high prices.
The improving economy "will help to prevent oil from falling very far," Armstrong said. "I`m not sure it will be enough to push oil into a higher trading band than we`ve been in."