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Oil flat after Fed decision to reduce stimulus

An oil pump works in the desert oil fields of Sakhir, Bahrain, Aug. 22, 2012. THE CANADIAN PRESS/AP, Hasan Jamali

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An oil pump works in the desert oil fields of Sakhir, Bahrain, Aug. 22, 2012. THE CANADIAN PRESS/AP, Hasan Jamali

The price of oil was little changed Thursday after a big drop in heating oil supplies was offset by the Federal Reserve's decision to further reduce its stimulus.

Benchmark U.S. crude for March delivery was up 6 cents at US$97.42 a barrel at 12:35 a.m. ET in electronic trading on the New York Mercantile Exchange. The contract slipped 5 cents to close at $97.36 on Wednesday.

Supplies of distillate fuels, including heating oil, declined sharply last week as the U.S. Northeast shivered through a cold spell. The Energy Department said distillate supplies dropped by 4.6 million barrels, twice what analysts expected. With cold weather expected to dominate forecasts for the next few weeks, refiners will be demanding more crude to produce heating oil.

The supply report helped push oil slightly higher Wednesday but that gain disappeared when the Fed, as expected, said it will cut its monthly bond purchases by an additional $10 billion to $65 billion because of a strengthening U.S. economy.

Oil prices have been underpinned by the Fed's stimulus because it has kept the dollar from strengthening, making oil more affordable for traders using other currencies. The low interest rates created by the bond buying have also attracted investors to commodities like crude oil in search of higher profits.

Brent crude, used to set prices for international varieties of crude, was down 1 cent at $107.84 on the ICE exchange in London.

In other energy futures trading in New York:

— Wholesale gasoline fell 0.5 cent to $2.664 a gallon.

— Heating oil rose 0.2 cent to $3.022 a gallon.

— Natural gas fell 16.3 cents to $5.30 per 1,000 cubic feet.

(TSX:ECA, TSX:IMO, TSX:SU, TSX:HSE, NYSE:BP, NYSE:COP, NYSE:XOM, NYSE:CVX, TSX:CNQ, TSX:TLM, TSX:COS.UN, TSX:CVE)

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