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Oil prices rebound ahead of Fed policy decision

The oil market rebounded on Tuesday as the United States was swept by another frigid cold front that sent heating fuel and natural gas prices up in some areas.

NEW YORK: The oil market rebounded on Tuesday as the United States was swept by another frigid cold front that sent heating fuel and natural gas prices up in some areas.

Traders however were cautious as the Federal Reserve began weighing further cuts to its stimulus amid fresh turbulence in global financial markets.

New York's main contract, West Texas Intermediate for March, rallied $1.69 to finish at $97.41 a barrel.

Brent North Sea crude for delivery in March, the European benchmark, rose 72 cents to settle at $107.41 a barrel in London trade.

"US oil prices have pulled back some ground after two consecutive days of declines to hold up fairly well," said CMC Markets analyst Michael Hewson.

"The cold weather premium which has driven the rally for the past two weeks continues to prevent a larger sell-off."

Investors were eagerly awaiting the outcome of a two-day US Federal Reserve policy meeting scheduled to end Wednesday.

The US central bank's Federal Open Market Committee is widely expected to decide on a further $10 billion reduction in its monthly asset purchases, to $65 billion.

In December, the FOMC said it would begin tapering the stimulus by $10 billion to $75 billion a month in January.

That has caused an outflow of capital from emerging markets, sinking stocks and currencies.

"Markets remain skittish and the mood is somewhat cautious as the focus remains on emerging-market travails," French bank Credit AgricoleĀ said in a note.

"The current bout of pressure may yet be contained but there is still some way to go before market stress is alleviated," it said.

Traders also were looking ahead to the US Department of Energy's weekly report on US petroleum inventories on Wednesday. Most analysts expect it will show another sharp drop in US stockpiles of distillates, which include heating fuel and diesel.

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