Oil climbed to a two-week high above $92 a barrel on Wednesday, as investors anticipate that a second US interest rate cut this week will overshadow news of a build in US crude stockpiles. Expectation Opec will leave production levels unchanged when it meets in Vienna this week also bolstered price.
US crude rose 75 cents to $92.39 a barrel, extending gains of 65 cents a day ago. London Brent crude were up 57 cents to $92.57 a barrel. The US Federal Reserve began a two-day meeting on Tuesday that was expected to end with the second interest rate cut in just over a week.
Following the cut on January 22, investors have widely bet the Fed would keep slashing to head off a recession, given the worsening financial market conditions. "There are expectations for a rate cut, which will give an incentive to the US economy," said Tetsu Emori, a fund manager at Japan's Astmax Co Ltd.
US economic data released on Tuesday was mixed, with stronger-than-expected orders for US-made durable goods in December countering a record fall in house prices in November.
With the potential for a Fed cut looming, investors put a forecast for a rise in crude supply in the United States on the backburner. A Reuters poll of analysts ahead of weekly US government inventory data forecast a 2.4 million barrel rise in crude stocks, a 1.9-million-barrel build in gasoline stockpiles and a 1.7-million-barrel distillate draw.
Expectations Opec will leave production levels unchanged when it meets this week in Vienna, despite calls from the US and other consumers for the cartel to open the taps to bring down prices, added to the bullish sentiment. Ecuador's oil minister said on Tuesday oil supplies to global markets were adequate and there was no need for Opec to change output at its upcoming meeting.
US Energy Secretary Sam Bodman reiterated calls for Opec to increase output to help rebuild global inventories. Iran Oil Minister Gholamhossein Nozari told an Iranian newspaper "there was no need to supply more oil as the market was supplied sufficiently and its conditions were stable."
Prices nudged up on news that output from the giant Cantarell oil field in Mexico, one of the top suppliers to the US, was expected to fall this year by 200,000 barrels per day (bpd). Production at the field was running at around 1.26 million bpd in December.