Oil futures increased thanks to anticipation that the Federal Reserve will cut interest rates. News that several crude oil pipelines in the Midwest were shut down due to ice storm also boosted crude prices.
Light, sweet crude for January delivery rose $1.81 to $89.67 a barrel in midday trading on the New York Mercantile Exchange. Crude prices have fallen in recent weeks but remain high by historical standards. A year ago, Nymex crude closed at $61.22 a barrel.
Crude prices were supported by expectations that the Fed will cut interest rates, a move that would likely help the U.S. economy - the world's top oil consumer - and bolster demand for crude.
However, the size of the Fed's cut could affect oil prices. A half-point cut is seen as supportive of higher prices, but "if it's a quarter-point cut, (prices) are more likely to go down," Lynch said.
Energy futures prices also rose on pipeline outages due to ice storms in the Midwest. An EIA report predicting "world oil demand will grow much faster than oil supply" offered traders mixed news. The report lowered global oil demand predictions for next year, but forecast oil prices will average nearly $85 a barrel in 2008 and that heating oil prices will rise 30 percent this winter compared to last.
Other energy futures also rose Tuesday. Heating oil futures rose 3.66 cents to $2.514 a gallon on the Nymex while gasoline futures rose 3.7 cents to $2.2871 a gallon. Natural gas futures added 3.6 cent to $7.068 per 1,000 cubic feet.
In London, Brent crude futures rose $1.43 to $89.47 a barrel on the ICE Futures exchange.
Energy traders were also anticipating Wednesday's inventory report from the EIA, which is expected to show an increase in crude supplies.