London: Oil held near two-week highs yesterday, bolstered by expectations of another cut in US interest rates to revive economic growth in the top energy consumer.

There was also a report of production disruption at a major Canadian oil sands facility.

But an anticipated rise in US crude oil stocks in government data due yesterday could pressure prices.

US crude rose 48 cents to $92.12 a barrel by 1427 GMT. London Brent crude was up 34 cents to $92.34 a barrel.

Severe crisis

The US Federal Reserve was expected to cut interest rates last night for the second time in just over a week to help the US economy cope with a housing slump and credit troubles in global financial markets.

The severity of the credit market crisis was highlighted again when Swiss bank UBS reported $4 billion in new write-downs related to bad mortgage loans.

"Once the Fed decision is out of the way, most financial and commodity markets could again come under pressure," said Edward Meir, analyst at broker MF Global in a research report, citing uncertainty over the health of the US economy.

US gross domestic product grew at a weaker-than-expected 0.6 per cent annual rate in the fourth quarter and for 2007 as a whole was up just 2.2 per cent, the slowest growth in the country's annual GDP since 2002.

Oil hit a record of $100.09 a barrel on January 3 partly on the back of long-term supply concerns, but has dropped back since then as fears of a US slowdown have intensified.

Positive

Goldman Sachs remains positive on oil's fundamental supply/demand picture despite concerns over the US economy.

"While concerns over economic growth will likely continue to create volatile swings in speculative positions and crude oil prices in the near term, current oil market fundamentals remain robust and continue to support our $95 a barrel average 2008 price forecast," the banking giant said in a research note.

But flows of speculative money into oil have been declining in the past two weeks towards low levels seen last summer during a sell-off resulting from the turmoil in the US credit markets, Goldman Sachs said.

The US Energy Information Administration's weekly update of fuel supplies at 1530 GMT was forecast to show a rise in crude stocks for the third week in a row.

A Reuters poll of analysts ahead of the data forecast a 2.4 million-barrel rise in crude stocks, a 1.9-million-barrel build in gasoline stockpiles and a 1.7 million-barrel distillate draw.

"Bigger-than-expected builds could potentially hit the [oil market] bulls with a double whammy," said MF Global's Meir.

Opec: Contributing factor

The view that Opec would leave production levels unchanged when it meets this week in Vienna was also supportive.

Ecuador's oil minister said on Tuesday oil supplies to global markets were adequate and there was no need for Opec to change output at the meeting.

US Energy Secretary Sam Bodman reiterated calls for Opec to increase output to help rebuild global inventories.