Oil Up Ahead of Inventories, Fed Meeting

By JOHN WILEN

NEW YORK – Oil prices rose Wednesday as investors placed bets on whether inventories rose last week and whether the Federal Reserve will cut interest rates.

“This is just a little position-adjusting ahead of the figures,” said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Ill.

Futures prices will initially be driven by the government’s weekly inventory report, due Wednesday morning, that is expected to show crude supplies rose sharply during the week ended Oct. 26. A sharp and unexpected drop in oil inventories in last Wednesday’s report triggered a price rally that drove crude futures to record highs above $93 a barrel early this week.

Later in the day, the Fed will announce its decision on rates. Interest rate cuts generally support oil prices because they tend to send the dollar downward; a larger than expected cut would further weaken a dollar already at multiple-decade lows against major currencies. Oil futures have been driven to record levels in recent months partly because they offer a hedge against a weak dollar.

Many investors expect the Fed to deliver a quarter-point cut at the end of its two-day meeting Wednesday afternoon.

Light, sweet crude for December delivery rose $1.10 to $91.48 a barrel on the New York Mercantile Exchange, recovering some of the $3.15 the contract lost Tuesday.

Other energy futures followed oil. November gasoline rose 3.64 cents to $2.2935 a gallon on the Nymex, and November heating oil rose 4.49 cents to $2.4695 a gallon. Both contracts expire Wednesday afternoon.

December natural gas rose 4 cents to $8.061 per 1,000 cubic feet on the Nymex.

In London, December Brent crude rose $1.11 to $88.55 a barrel on the ICE Futures exchange.

Prices were also supported by the Commerce Department’s report that the economy grew at a 3.9 percent pace in the third quarter, more than analysts expected. Energy investors see robust economic data as a sign that demand for oil and petroleum products will remain strong.

At the pump, prices continued to rise in response to crude prices, which have jumped 35 percent since August. Retail gas prices rose 2.4 cents overnight to a national average of $2.899 a gallon, according to AAA and the Oil Price Information Service.

In its inventory report, the Energy Department’s Energy Information Administration is expected, on average, to show oil inventories rose by 100,000 barrels last week, though the estimates of analysts surveyed by Dow Jones Newswires vary widely.

The analysts expect, on average, that refinery activity grew by 0.5 percentage point to 87.6 percent of capacity last week, while gasoline inventories rose by 400,000 barrels and supplies of distillates, which include heating oil and diesel fuel, fell by 1 million barrels.

With the inventory report and Fed meeting coming on the same day, analysts are expecting a wild ride.

“We’re going to see some big (price) swings here today,” Ritterbusch said.

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Associated Press writers George Jahn in Vienna and Gillian Wong in Singapore contributed to this report.