The Wall Street Journal-20080131-Crude Oil-s Rally Continues

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Crude Oil's Rally Continues

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Crude-oil futures rose following another U.S. interest-rate cut.

The Federal Reserve's efforts to avert a recession may keep energy demand buoyant, traders said.

Light, sweet crude for March delivery rose 69 cents, or 0.8%, to settle at $92.33 a barrel on the New York Mercantile Exchange. This is the fifth consecutive rise for the front-month contract.

Crude's rally began Jan. 24, two days after the Fed orchestrated an emergency three-quarter percentage-point reduction in its benchmark interest rate in the face of a troubling U.S. economic outlook. In cutting its federal funds target rate by another half-percentage point to 3% yesterday, the U.S. central bank signaled it is willing to trim more as necessary.

"The language is all positive," said Tom Bentz, a broker and analyst at BNP Paribas Commodity Futures in New York. "It's just adding to the upside potential of the oil markets right now."

Amid concerns an economic slowdown would chill oil demand, Nymex oil futures have eased back from their $100 highs earlier this month. The Fed's moves in the last two weeks have since raised hopes that the U.S. may steer clear of a recession.

"The view is if lower interest rates can help boost the economy in any way, it's going to be reflected in more energy demand," Mr. Bentz said.

Oil markets rose despite U.S. data released earlier yesterday showing crude and gasoline stockpiles grew more than expected last week.

U.S. and global oil inventories are likely to figure into discussions among Organization of Petroleum Exporting Countries delegates when they meet in Vienna tomorrow. OPEC President Chakib Khelil said the group would make the right output decision based on a weakening global economy and second-quarter demand, as well as healthy oil stockpiles.

"Right now, stocks are at a good level and second-quarter demand is going to be lower and the economy is not doing so well so I think OPEC is going to make the appropriate decision," Mr. Khelil said.

The oil minister of Saudi Arabia, Ali Naimi, called current global oil market fundamental forces "sound," offering little indication that the OPEC will alter production tomorrow.

In other commodity markets:

GOLD: Prices on the Comex division of Nymex fell during regular- hours trading, before the Fed rate-cut news. But then they rallied on the rate news in the thinly traded after-hours session, setting a record in electronic trade. Nearby February gold rose in that session to an all-time high of $936.30 an ounce, erasing the losses sustained during the day-only session, when February gold had settled at $920.60, down $4.50. Most-active April also fell $4.50 to $926.30.

COPPER: Futures remained weaker despite the interest-rate cut by the FOMC, but moved off of the losses established during the day-session. Copper was down during the day session on profit-taking ahead of the meeting. Nearby February copper on the Comex fell 7.65 cents to $3.2160 a pound. At one point in late-afternoon thinly trade after- hours session, February copper was down 2.85 cents to $3.2640.

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Debbie Carlson contributed to this article.