The price of oil rose to around $93 a barrel Wednesday as energy markets appeared to set aside worries about the financial crisis in Cyprus and look to the U.S. Federal Reserve for signs about the future of its stimulus program.
By early afternoon in Europe, benchmark oil for April delivery was up 89 cents to $93.05 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.58 to finish at $92.16 on Tuesday.
Brent crude, used to price many kinds of oil imported by U.S. refineries, was up $1.04 to $108.49 a barrel on the ICE Futures exchange in London.
Oil prices fell Tuesday after lawmakers in Cyprus rejected a plan to tax bank deposits to stabilize the country's banks and clear the way for an international bailout of 10 billion euros ($12.9 billion).
"The Cyprus saga has been tabled since the Cypriot parliament rejected the savings reduction bailout plan," said the Kilduff Report's Energy Overview, edited by Michael Fitzpatrick. "Apparently, Russia and/or Gazprom have offered a private bailout, as well. Regardless, time has been put back on the clock."
Other analysts said the uncertainty over Cyprus would prevent oil prices from rising too far.
"Clearly, market players anticipate that an alternative solution will be found for Cyprus," said a report from Commerzbank in Frankfurt. "Nonetheless, the uncertainty surrounding this issue is likely to continue to keep the oil prices in check in the short run. "
Fitzpatrick also predicted the U.S. Fed, which ends a two-day policy meeting later Wednesday, would keep interest rates low and uphold other measures meant to stimulate economic growth -- feeding expectations of rising oil demand.
"We expect a full, continuing commitment to monetary easing. Despite some improvement in the labor market, the U.S. is nowhere near the Fed's target," Fitzpatrick said. "Without robust employment levels, the Fed sees no risk of inflation and that is the bottom line."
Later Wednesday, the U.S. Energy Department is expected to report an increase of 2 million barrels in U.S. crude oil supplies, according to a survey of analysts by Platts, the energy information arm of McGraw-Hill (NYSE:SPGI). U.S. oil production, at more than 7 million barrels a day, is at the highest level in 20 years.
In other energy futures trading on the Nymex:
- Wholesale gasoline rose 1.87 cent to $3.059 a gallon.
- Heating oil added 2.4 cents to $2.9924 a gallon.
- Natural gas fell 7.2 cents to $3.897 per 1,000 cubic feet.