Oil futures rise on Fed cut impact

Commodity Online

NEW YORK: US Feds decision to cut lending rates had its impact in crude futures as it soared Tuesday and end a little above 109 US dollars.

Crude oil for April delivery closed up 3.74 dollars, or 3.5 percent, to 109.42 dollars a barrel on the New York Mercantile Exchange.

The Federal Open Market Committee cut the fed fund rate, the rate at which banks lend to each other overnight, by 0.75 percent to 2.25 percent.

The rate cut drove down the value of the greenback against other currencies.

Crude prices, denominated in dollars, tend to rise when the greenback falls, as a weaker U.S. currency makes crude less expensive to buyers holding other currencies. It also eats into oil producers' dollar denominated revenues and forces them to raise prices.

Other energy futures also rose. April heating oil futures rose 6.95 cents to settle at $3.1379 a gallon while April gasoline futures rose 15.58 cents to settle at $2.66 a gallon.