SINGAPORE, Sept 19 (Reuters) Oil climbed above a barrel on Wednesday, near a record reached a day earlier after the U.S.
Federal Reserve slashed interest rates to calm worries over economic growth ahead of peak winter fuel demand.
U.S. light crude for October delivery rose 72 cents to .23 a barrel by 0639 GMT, after gains of 94 cents on Tuesday, when prices hit a fresh record of .38. London Brent crude gained 68 cents to trade at .27 a barrel.
The Federal Reserve chopped U.S. interest rates by a hefty half-percentage point on Tuesday, in a bid to shield the economy from a housing slump and financial turbulence, sparking an equities and commodities rally and giving oil another boost.
''Now the market is going to be searching for a barrel,'' said Tony Nunan, risk management executive at Mitsubishi Corp in Tokyo.
Oil prices, which have gained more than a third since the start of the year, have risen on hurricane threats and other supply risks, fund flows into energy from poorly performing equity markets and falling U.S. inventories.
U.S. crude oil supplies are forecast to have dropped for the fourth week in a row last week, down by 2 million barrels as imports shrank further, said industry analysts polled by Reuters ahead of government data later on Wednesday.
''If we get a big drop in inventories, like three to seven million, then prices could get there in a hurry,'' Nunan added.
Crude stocks are already at the lowest level in eight months.
Gasoline stocks probably dropped for the seventh-straight week, as demand remained strong while production may have dropped because three Texas refineries temporarily shut due to Hurricane Humberto, though distillate stocks were seen rising Another storm was expected to develop and enter the Gulf of Mexico later this week, leading Shell Oil Co to evacuate 300 non-essential workers in the Gulf, though production was unaffected on Tuesday Reacting to the rally, the Organization of the Petroleum Exporting Countries will probably hold consultations about a further output increase if oil prices stay above a barrel for more than 15 to 20 days, an OPEC source told Reuters on Tuesday.
Some members of the cartel that supplies more than a third of the world's oil are uncomfortable with the potential impact of the high oil price on global economic growth and future oil demand. But it was too early to say whether OPEC needed to boost supply further, the source said.
OPEC agreed last week to raise output by 500,000 barrels per day from Nov. 1 but the increase did little to soothe consumer fears that energy supplies may run thin this winter.
The world's second-largest oil consumer China on Wednesday froze all state-set prices, likely to prop up oil demand since subsidised fuel prices have spurred consumption during oil's five-year rally.
Though U.S. crude prices have quadrupled since 2002, when adjusted for inflation the price is below the peaks of the Iranian Revolution in 1979.
REUTERS SBA RS1217