Oil prices climb before Fed rate decision

In this photo taken Monday, July 2, 2012, fuel tanker trucks arrive at a North Little Rock, Ark., petroleum distributorship before making daily deliveries to gasoline retailers. Global oil prices advanced on Wednesday, Aug. 1, 2012, in cautious deals as traders awaited the latest US Federal Reserve policy decision and digested signs of strong demand from top consumer the United States. AP PHOTO/DANNY JOHNSTON

LONDON—Global oil prices advanced on Wednesday in cautious deals as traders awaited the latest US Federal Reserve policy decision and digested signs of strong demand from top consumer the United States.

Brent North Sea crude for delivery in September gained $1.20 to $106.12 a barrel in late afternoon deals in London.

New York’s main contract, light sweet crude for September, added 80 cents to $88.23.

Prices earlier hit two-week lows on fading hopes for additional stimulus measures from the Federal Reserve and European Central Bank, analysts said.

However, the oil market rebounded on signs of solid demand in the United States.

“All eyes are focused on the US Federal Reserve, although expectations for a decisive move to stimulate the economy appear to be waning,” said analysts at the Vienna-based JBC Energy consultancy in a research note to clients.

The two-day Fed meeting concludes Wednesday, followed by an ECB meeting on Thursday.

The Federal Reserve’s top policy makers were expected to shy away from launching new stimulus measures for the faltering US economy, with an announcement due at about 1815 GMT.

Ahead of the Fed announcement, the US government said that American crude stockpiles fell 6.5 million barrels in the week ending July 27.

That was much more than market expectations for a drop of 800,000 barrels, according to analysts polled by Dow Jones Newswires, and indicated strong demand.

“Oil prices moved up higher, off their two-week lows as US commercial crude inventories showed a decrease 6.5 million barrels,” said Sucden analyst Brenda Kelly.

“In the absence of any (monetary policy) easing, the slowdown in China and Europe could keep prices fairly subdued in the near term,” Kelly added.