Oil rises above $86 ahead of Fed policy meeting

[September 20, 2011]  SINGAPORE (AP) -- Oil prices rose above $86 a barrel Tuesday in Asia as investors looked to a U.S. central bank meeting this week for measures to boost economic growth.

Benchmark oil for October delivery was up 81 cents at $86.51 at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. Crude dropped $2.26 to settle at $85.70 on Monday.

In London, Brent crude for November delivery was up 70 cents at $109.84 on the ICE Futures exchange.

Investors will be closely watching the U.S. Federal Reserve's two-day meeting starting later today. Some investors expect the Fed to announce stimulus measures to help spur economic growth.

Crude has traded between $80 and $90 for more than a month as traders wait for evidence Europe can solve its debt problems and whether the U.S. will slip into recession.

Italy's credit rating was downgraded one notch by Standard & Poor's Ratings Services on Monday because of weak economic growth and high government debt levels. S&P has a negative outlook on Italy's ratings, citing political and policy differences that will likely limit the country's ability to respond effectively to its debt crisis.

Analysts are concerned Europe's debt woes will exacerbate slowing global economic growth. National Australia Bank this week cut its 2011 global growth forecast to 3.8 percent from 4.0 percent.

"Given this slower growth, and its subsequent impact on demand, there is good reason to be bearish on oil prices through the remainder of 2011," NAB said in a report.

In other Nymex trading for November contracts, heating oil rose 1.3 cents to $2.97 per gallon and gasoline futures gained 1.1 cents to $2.69 per gallon. Natural gas for October delivery added 1.9 cents to $3.85 per 1,000 cubic feet.

[Associated Press; By ALEX KENNEDY]

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