NEW YORK - Hopes that the Fed­er­al Re­serve will sig­nal po­ten­tial steps to boost a slow­ing US econ­o­my have helped the price of oil rise more than two per cent yes­ter­day. Chi­na al­so re­port­ed strong au­to sales for last month, and the US said crude sup­plies de­clined last week by a much larg­er amount than what an­a­lysts ex­pect­ed.

Bench­mark US crude rose by US$2.05, or 2.4 per cent, to US$85.96 per bar­rel in af­ter­noon trad­ing in New York. Brent crude, which helps set the price of im­port­ed oil, in­creased by US$1.96, or 2 per cent, to US$99.93 per bar­rel in Lon­don. The Fed is ex­pect­ed to re­lease the min­utes of a June meet­ing where it de­cid­ed to ex­tend a bond-buy­ing pro­gramme through the end of the year.

In­de­pen­dent oil an­a­lyst An­drew Lipow said in­vestors are bet­ting the min­utes will pro­vide new de­tails about what steps the Fed would take to stim­u­late the econ­o­my if it keeps slow­ing down. "They'll be look­ing for any en­cour­ag­ing words," Lipow said. The Fed will re­lease its re­port at 2 pm EDT (1800 GMT).

Prices be­gan to rise ear­ly in the day af­ter Chi­na's au­to in­dus­try said sales jumped nine per cent in June de­spite a slow­ing econ­o­my. Chi­na has quick­ly be­come the world's biggest mar­ket for new ve­hi­cles, lead­ing some cities to lim­it new reg­is­tra­tions in hopes of con­trol­ling traf­fic con­ges­tion. Those lim­its drove cus­tomers to show­rooms last month to buy cars ahead of any re­stric­tions.

In the US, the gov­ern­ment said oil sup­plies fell last week by 4.7 mil­lion bar­rels-triple the de­cline ex­pect­ed by an­a­lysts-as re­finer­ies cranked up pro­duc­tion of gaso­line and oth­er re­fined fu­els. Av­er­age oil de­mand al­so in­creased slight­ly last week. Mean­while, the Or­gan­i­sa­tion of Pe­tro­le­um Ex­port­ing Coun­tries re­port­ed that world sup­plies fell last month by about 100,000 bar­rels per day, in part be­cause of a large drop in pro­duc­tion in Iran. Iran­ian oil pro­duc­tion has suf­fered as Eu­rope and the US work to lim­it its ex­ports and force the coun­try to scale back its nu­clear pro­gramme. West­ern na­tions fear Iran is build­ing a weapon; Iran de­nies the claim.

In oth­er fu­tures trad­ing, heat­ing oil added three cents to US$2.75 per gal­lon while gaso­line fu­tures rose by 1.76 cents to US$2.7645 per gal­lon. Nat­ur­al gas in­creased by 6.2 cents to US$2.799 per 1,000 cu­bic feet.

AP