Crude oil rises above $82 after Fed cuts rates

Crude oil traded above $82 a barrel in New York for a second day on speculation a cut in U.S. interest rates will revive the economy and strengthen demand for energy. Oil has risen 11 per cent so far in September, heading for its biggest monthly gain since January 2006. Prices also climbed as Royal Dutch Shell Plc evacuated staff from the Gulf of Mexico because of concern a storm will strike production platforms.

"Decreasing rates seems like a positive sign to get the economy back on track; it should support oil consumption in the longer term,'' said Thina Saltvedt, an analyst at Nordea Bank AB in Oslo. "Even if there's no damage from the storm, there can be delays to production.''

Crude oil for October delivery rose as much as 86 cents, or 1.1 per cent, to $82.37 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $82.23 at 10:58 a.m. in London. The futures touched $82.38 late yesterday, the highest intraday price since the contract was introduced in 1983. Prices are up 33 per cent from a year ago. Brent crude for November delivery gained as much as 81 cents, or 1 per cent, to $78.40 a barrel on the London-based ICE Futures Europe exchange. It was at $78.10 at 10:59 a.m. London time.

The spread between the US and European benchmark crudes grew to $3.9 9 today, the largest gap since December 29, 2004, based on closing prices. US crude supplies are expected to decline while North Sea production rises, helping to widen the gap. Daily shipments of North Sea Brent crudes will rise 7.4 per cent to 47.5 million barrels next month, according to company loading schedules.

The Federal Reserve cut its benchmark interest rate yesterday by half a percentage point, more than economists had predicted, to help sustain economic growth in the US, the world's largest oil user. The Reuters-Jeffries/CRB Index of 19 commodities yesterday closed at its highest since September 5, 2006.

"The Fed cutting rates slightly more than some people expected has reduced demand concern, made cheap money available again, and made the dollar cheaper, so oil's effectively cheaper,'' said Michael Davies, an analyst at Sucden (UK) in London.