The price of oil moved up closer to $98 a barrel Thursday, supported by the cold weather in the United States which led to a big drop in heating oil supplies.
By early afternoon in Europe, benchmark U.S. crude for March delivery was up 50 cents at $97.86 a barrel in electronic trading on the New York Mercantile Exchange. On Wednesday, the contract slipped 5 cents to close at $97.36.
Supplies of distillate fuels, including heating oil, declined sharply last week as the U.S. Northeast shivered through a cold spell. The Energy Department said late Wednesday that distillate supplies dropped by 4.6 million barrels, twice what analysts expected. With cold weather expected to dominate forecasts for the next few weeks, refiners will be demanding more crude to produce heating oil.
The surge in demand dropped distillate supplies to around 22 percent below five-year averages.
The supply report helped push oil slightly higher Wednesday but that gain disappeared when the Fed, as expected, said it will cut its monthly bond purchases by an additional $10 billion to $65 billion because of a strengthening U.S. economy.