The price of oil moved up closer to $98 a barrel Thursday, supported by the cold weather in the United States which led to a big drop in heating oil supplies.
By early afternoon in Europe, benchmark U.S. crude for March delivery was up 50 cents at $97.86 a barrel in electronic trading on the New York Mercantile Exchange. On Wednesday, the contract slipped 5 cents to close at $97.36.
Supplies of distillate fuels, including heating oil, declined sharply last week as the U.S. Northeast shivered through a cold spell. The Energy Department said late Wednesday that distillate supplies dropped by 4.6 million barrels, twice what analysts expected. With cold weather expected to dominate forecasts for the next few weeks, refiners will be demanding more crude to produce heating oil.
The surge in demand dropped distillate supplies to around 22 percent below five-year averages.
The supply report helped push oil slightly higher Wednesday but that gain disappeared when the Fed, as expected, said it will cut its monthly bond purchases by an additional $10 billion to $65 billion because of a strengthening U.S. economy.
Oil prices have been underpinned by the Fed’s stimulus because it has kept the dollar from strengthening, making oil more affordable for traders using other currencies. The low interest rates created by the bond buying have also attracted investors to commodities like crude oil in search of higher profits.
Brent crude, used to set prices for international varieties of crude, was up 6 cents at $107.91 on the ICE Futures exchange in London.
In other energy futures trading in New York:
— Wholesale gasoline added 0.41 cent to $2.6727 a gallon.
— Heating oil rose 0.83 cent to $3.0287 a gallon.
— Natural gas fell 26.9 cents to $5.196 per 1,000 cubic feet.