Oil climbs on central bank plan

Oil prices have been volatile on fears over the health of the US economy

Oil prices rebounded on fresh hopes that the global economy could remain robust after unprecedented action taken by a number of key central banks.

The plan to make available billions of dollars worth of loans to cash-strapped banks pushed a barrel of New York light crude up $4.37 to $94.39 a barrel.

A US government report showing an unexpected fall in crude stocks and heating oil raised supply fears.

Brent crude also hit $94 a barrel after sinking to $88 a barrel last week.

By the end of last week, world oil prices had fallen more than $10 from their November peak of near $100 a barrel.

The sell-off came when traders took profits as the certainty that the US economy would weather the sustained housing slump and financial market turmoil snapped and the spectre of a recession dawned.

Dramatic move

But a quarter point cut in US interest rates to 4.25% from 4.5%, delivered by the Federal Reserve after its meeting on Tuesday, persuaded energy traders that the Fed was focused on relieving the pressures facing the US economy and put oil back on the front foot.

These gains were dramatically extended following the earlier announcement that the Fed would team up with other key central banks, including the Bank of England and the European Central Bank, to assuage gummed up credit markets.

It is hoped the bold move will prevent commercial banks in the US, Europe and the UK from increasing charges on credit cards, unsecured loans and mortgages, bringing spending among indebted populations to a standstill.

"Anything the Fed is doing to help out is going to support oil prices," said Brad Samples, commodities analyst at Kentucky-based consultancy Summit Energy Services.

An energy department report showing US crude oil stocks at two-year lows after falling by a greater-than-expected 700,000 barrels supported fears that supply could be tight as the northern hemisphere prepares for a cold winter.

Stocks of distillate fuel, which include heating oil and diesel fuel, were also disappointing, declining 800,000 barrels. Analysts had predicted a decline of about 500,000 barrels.

A large oil spill off the Norwegian coast where 25,000 barrels of crude poured into the North Sea as it was being piped from a loading facility into an oil tanker would also have riled a sensitive market, analysts said.

Oil prices break through $93 mark

Oil prices have risen to yet another fresh high due to ongoing concerns over the situation between Turkey and Iraq, and general supply jitters.

In early Asian trading on Monday, US light crude broke through $93 a barrel for the first time, hitting $93.20 before easing back slightly to $93.06.

London's Brent also hit a new high of $89.90 a barrel, up $1.21.

Oil prices have risen on fears Turkey may carry out an extensive ground assault against Kurdish rebels in Iraq.

'Geopolitical tensions'

"What we see is a continuation of the trend that was in place on Friday," said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney.

"Geopolitical tensions, issues regarding tensions between Turkey and Kurdish rebels... those sort of factors have added to oil prices."

Analysts said prices had been further lifted by concerns that a tropical storm in the Caribbean could make its way to the US gulf coast, hitting key American oil facilities.

US light crude broke through the $92 a barrel price for the first time on Friday.

Oil price hovers near record high

Oil prices surged past the $83-a-barrel level on Thursday, near record highs, after a US inventory report showed lower-than-expected stockpiles.

Supply fears sent US sweet light crude up $1.78 to $83.08 a barrel, near its $83.90 high set on 20 September.

US crude stocks fell by 1.7 million barrels last week, according to the US department of energy. A gain of one million had been expected.

The news also pushed up London Brent Crude by $1.55 to $80.15.

World oil prices have been rising since the beginning of the year on the fear that supply will be unable to cope with rising demand.

In addition, some investors have bet heavily that the price of crude oil must rise further, pushing up prices even higher.

Oil prices slide back below $80

Oil prices retreated below the $80-a-barrel mark in London on Tuesday as investors looked ahead to Wednesday's US inventory report.

Profit taking and investor caution has seen the price of US light sweet crude fall back from the $83.90 high, seen on 20 September.

After dropping $1.42 on Monday, it fell another 78 cents to $79.46, while Brent crude dipped 85 cents to $76.79.

Analysts say the inventory report will be important for short-term prices.

The dip comes despite the US dollar hitting a string of record lows against the euro and other currencies.

This makes oil - and other commodities priced in dollars - cheaper for customers with non-dollar funds.

Indications that the Gulf of Mexico has seen the worst of the hurricane season has also prompted some profit taking, analysts say, with calmer weather likely to reduce concerns over supply, and lead to lower prices.