Expectations that the Fed will cut interest rates, combined with an unexpected drop in crude supplies last week, could finally send oil prices over $100 a barrel.
The Fed is widely expected to approve a quarter-point cut in short-term borrowing rates this afternoon, a move that could further weaken the dollar and act as an enticement to buy oil.
Because oil is priced in dollars, a weaker U.S. currency makes oil cheaper for those in other countries to convert their currency and buy crude. That increased buying sends oil prices even higher.
In the meantime, a report on oil supplies showed crude stocks down 3.9 million barrels, news that stunned a market looking for an increase of 600,000 barrels.
It all adds up to more price pressure on oil [US@CL.1 94.19 
3.81 (+4.22%) 
], which surged to a record high of $93.80 on Monday and is just below that level today. Some analysts believe the $100 threshold is now well within sight of speculators who have been aggressively betting up oil prices.
"I think that's entirely possible," said Randy Ollenberger, managing director at BMO Capital Markets. The Fed rate cut "is going to lead to further weakness in the US dollar. There's obviously going to be a great correlation between oil prices moving higher and the dollar moving lower."
Analysts generally have oil fundamentals calling for a price between $75 to $80 a barrel.
But a rash of speculation driven primarily by geopolitical tensions has kept prices inflated. Javad Yarjani, an Iranian oil official with the Organization of Petroleum Exporting Countries, warned of an oil "bubble" that would pop.
Today's supply data, though, indicated that the oil rally could have more legs.
"Everybody wants to pick a number," said Mike Theesfeld, a trader with HPR Commodities.
"I wouldn't be surprised to see $95."(http://www.cnbc.com)
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