By The Associated Press, Associated Press
NEW YORK (AP) — The price of oil closed above $98 a barrel for the first time in more than four months after the U.S. Federal Reserve announced aggressive steps to boost the U.S. economy.
The Fed said Thursday it will spend $40 billion a month to buy mortgaged-back securities for an indefinite period. The purchases are intended to lower long-term interest rates to spur borrowing and spending. The Fed also extended a plan to keep short-term interest rates at record-low levels through mid-2015, as it attempts to boost an economy it says is too weak to reduce high unemployment.
Benchmark oil closed at $98.31, up $1.30. The last time it finished higher was May 4.
Expectations of action by the Fed, as well as the European Central Bank and China's government, have balanced gloomy economic news and kept oil in a narrow range the past few weeks.
Phil Flynn of the Price Futures Group said he expects the Fed decision to "reinvigorate" the stock market and boost the price of oil. The increase in oil should be gradual, however, as traders continue to focus on key economic indicators, especially jobs numbers.
"Even this massive bond buying, it's going to take some time to sink in," Flynn said.
Traders on Thursday also kept a close eye on unrest in the Middle East.
Protesters stormed the U.S. Embassy compound in Yemen's capital Thursday, and there is violence around the U.S. mission in Cairo. The U.S. ambassador to Libya was killed Tuesday.
Brent crude, used to price international varieties of oil, ended up 55 cents at $115.88 per barrel.
Meanwhile, the average price for a gallon of gas in the U.S. rose to $3.87, the highest since April 21 and just 7 cents below the high for the year. Refiners have run short on supplies of summer blends of gas, particularly in the Northeast. They're allowed to start selling cheaper winter blends this weekend.
Experts believe gas prices will soon start to fall. Gasoline futures dropped 3.9 cents to $2.962, on top of a 4.2 cent drop a day earlier.
Natural gas dropped Thursday after the Energy Department said supplies rose last week.
Natural gas in storage increased by 27 billion cubic feet to 3.429 trillion cubic feet for the week that ended Sept. 7. The supply is 11.1 percent more than the year-ago level of 3.087 trillion cubic feet and 9 percent more than the five-year average of 3.145 trillion cubic feet.
Natural gas ended down 2.6 cents at $3.037 per 1,000 cubic feet.
Heating oil, which had risen 2 percent over the first three days of the week, fell less than a penny to $3.2113.
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