Oil prices rise after Fed rules out US rate hike

Oil prices rose Thursday on news that the US Federal Reserve would keep interest rates low for more than two years to boost growth in the world's biggest economy, analysts said. New York's main contract, West Texas Intermediate crude for delivery in March, gained 78 cents to $100.18 a barrel. Brent North Sea crude for March jumped $1.23 to $111.04 in London midday deals. "Yesterday's Fed announcement underpins crude oil prices in two main ways," said Jack Pollard, an analyst at Sucden Financial Research. "Firstly, the long-term accommodative policy should help support economic growth and, accordingly, energy demand from the world's largest crude user. "Secondly, (because) the decision has pressured the dollar." A weaker US currency makes dollar-denominated crude cheaper for buyers holding other currencies, thereby boosting demand. The US central bank's policy-setting Federal Open Market Committee (FOMC) on Wednesday announced it would keep its "highly accommodative" monetary policy to support the fragile economic recovery. The FOMC said its key interest rate would remain near zero through at least 2014, extending a prior timeframe of mid-2013. The bullish Fed news overshadowed lingering worries over a potential Greek debt default and earlier US government data showing weaker energy demand. Oil traders were also following the latest news regarding Iran after the European Union this week imposed a ban on the Islamic Republic's oil and of assets owned by its central bank. Iran's President Mahmoud Ahmadinejad on Thursday insisted that his country would not be hurt by newly imposed Western sanctions. "Once our trade with Europe was around 90 percent but now it has reached to 10 percent and we are not seeking this 10 percent... experience has shown that the Iranian nation will not be hurt," Ahmadinejad said on state television. "For the past 30 years the Americans have not been buying oil from us. Our central bank has no relations with you," he added. The embargo, aimed at dissuading Iran from building a nuclear weapon, could see the major oil exporter react by closing the strategic Strait of Hormuz. The narrow waterway that links the oil-rich Gulf with the Arabian Sea and beyond is crucial to the global economy, as about 40 percent of global oil exports pass through it. Any blockade of the Hormuz strait would meanwhile send oil prices soaring by more than $30 a barrel, the IMF estimated in a report released Wednesday.