NEW YORK, USA

Oil prices rose modestly yesterday after a Federal Reserve meeting where officials struck a positive tone about the US economy.

Benchmark oil for April delivery gained 37 cents to settle at US$106.71 ($9,284) a barrel on the New York Mercantile Exchange.

In London, Brent crude ended up 88 cents at US$126.22 per barrel on the ICE Futures exchange.

A third straight month of strong US jobs growth in February has bolstered investor confidence that the recovery in the world’s biggest economy is strengthening and will eventually increase demand for crude.

The Commerce Department said yesterday that Americans stepped up spending on retail goods in February, evidence that a stronger job market is boosting the economy. Retail sales increased 1.1 per cent last month — the biggest gain since September.

Also Tuesday, after a one-day meeting, the Fed said unemployment should continue to decline gradually as the economy expands. It also noted that consumer spending and business investment have picked up.

Meanwhile, the American Petroleum Institute is expected to release its weekly report on inventories later yesterday. That precedes the report by the US Department of Energy, due Wednesday.

Analysts are eyeing the possibility that global crude producers won’t be able to boost output enough to match demand if Iran’s four million barrels a day of production is cut.

“Global spare capacity has been dwindling, and crude demand is about to start rising seasonally,” said Citigroup, which expects Brent to average US$130 in the third quarter. “Recent developments point to higher oil prices to come and the odds of a spike to new peaks rises.”

Crude has jumped from US$96 a barrel last month amid investor concern that growing tensions over Iran’s nuclear program could spark a military conflict that disrupts global crude supplies.

In other energy trading in New York, natural gas futures, which have been steadily declining this year because balmy weather has crimped demand, surged after the Fed said it expects the economy to expand moderately in the coming months. Natural gas rose three cents to finish US$2.299 per 1,000 cubic feet in New York trading, after hitting a 10-year low of US$2.269 on Monday.

Heating oil futures rose three cents to finish at US$3.27 per gallon and gasoline futures increased three cents to US$3.35 per gallon.