TM: Oil rises above $99 after US crude supply drop
Oil prices climbed above $99 a barrel Wednesday thanks to a weaker dollar and after a report showed U.S. crude supplies dropped more than expected, a sign that demand may be improving.
By early afternoon in Europe, benchmark oil for August delivery was up $1.18 to $99.04 a barrel in electronic trading on the New York Mercantile Exchange. Crude rose $1.57 to settle at $97.50 on Tuesday.
In London, the September contract for Brent crude rose $1.33 to $118.39 per barrel on the ICE Futures exchange.
The American Petroleum Institute said late Tuesday that crude inventories fell 5.2 million barrels last week, while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted a drop of 1.3 million barrels.
Inventories of gasoline rose 2.0 million barrels last week, while distillates increased 1.1 million barrels, the API said.
The Energy Department's Energy Information Administration reports its weekly supply data — the market benchmark — later Wednesday.
Evidence that the U.S. housing market may be recovering also helped boost investor optimism and oil prices. The Commerce Department on Tuesday said construction of new homes grew by 14.6 percent last month.
The Dow Jones industrial average jumped 1.6 percent Tuesday and most Asian and European stock markets gained Wednesday.
"The oil price support was heavily influenced by some housing starts and permit figures that easily exceeded expectations," energy analyst Ritterbusch and Associates said in a report. "Swings in the euro and the U.S. stock market have become an important influence behind the oil price movements seen thus far this month."
A weaker dollar contributed to supporting oil prices by making crude cheaper for investors holding other currencies.
"The dollar also lost ground to the euro, suffering on the possibility that Moody's may cut the U.S. credit rating, which would open the way to significant deterioration of the greenback and consequently, beneficial to oil prices," said Mike Fitzpatrick, editor-in-chief of The Kilduff Report.
The euro rose to $1.4211 on Wednesday from $1.4134 late Tuesday in New York, while the dollar fell to 78.87 Japanese yen from 79.24 yen.
In other Nymex trading in August contracts, heating oil added 2.97 cents to $3.1277 a gallon, while gasoline gained 1.98 cents to $3.1347 a gallon. Natural gas futures advanced 5.2 cents at $4.585 per 1,000 cubic feet.
