LONDON—Crude oil futures moved into positive territory for the day as the dollar hit intraday lows.
"Crude futures have bounced back up, gaining strongly over the past week," said Andrey Kryuchenkov, an analyst at VTB Bank. He attributed some of that rise to a pronounced narrowing in contango, or where near-term futures prices are cheaper than prices further along the curve.
"Oil prices benefited from rallying equities amid improving risk sentiment, some positive macroeconomic data and record June crude oil imports in China. In addition, crude was helped by a softer dollar," he said.
A weaker dollar compared with the euro and other currencies lifts oil prices as it makes the commodity, which is traded in dollars, less expensive to buy for holders of other currencies.
The front-month September Brent contract on London's ICE futures exchange recently was up 31 cents at $76.97 a barrel. The August light New York Mercantile Exchange light sweet crude contract traded 42 cents higher at $77.46 a barrel.
The ICE's gasoil contract for August delivery was flat at $651.75 a metric ton, while Nymex gasoline for August delivery was 132 points higher at 207.97 cents a gallon.
Trading has been volatile in the last week, with crude rallying on fresh optimism about economic recovery and an extended rally in equity markets, but quickly losing ground on dovish minutes from the U.S. Federal Reserve and soft growth data from China.
U.S. inventories data from the Department of Energy for the week to July 9 was a mixed bag with a crude draw of 5.06 million barrels sparking a brief rally. Refinery runs soared to more than 90% of total capacity, their highest level in 2 ½ years. Gasoline and distillates inventories rose.
Goldman Sachs analysts adjusted their forecast for prices for the remainder of the year and now expect Nymex crude to trade at the lower end of a $85-$95 a barrel range in the second half of 2010, "as it will take longer to draw-down [Organization of Economic Cooperation and Development] total petroleum inventories to [a] more normal level."
The analysts said high crude and products stocks on both sides of the Atlantic combined with fragile sentiment mean oil market fundamentals haven't tightened as quickly as anticipated.
They said they expect global refining margins will remain under pressure as a result of expanding capacity in Asia.
The Organization of Petroleum Exporting Countries said in its monthly report it expects moderate growth in global oil demand next year, an indication the group will probably have to keep its big existing supply cuts in place well into a third successive year.
Write to Angela Henshall at angela.henshall@dowjones.com
