NEW YORK -- Crude-oil futures shot up, reversing sharp losses from the prior session as rising confidence in an economic recovery displaced concerns about weak oil demand.
Light, sweet crude for September delivery rose $3.59, or 5.7%, to $66.94 a barrel on the New York Mercantile Exchange.
Oil prices almost completely recovered from Wednesday's 5.8% drop as resurgent optimism about the U.S. economy pushed up most commodities and equities markets. The Dow Jones Industrial Average hit a 2009 high after the Labor Department reported a smaller-than-expected increase in new jobless claims.
A potential cap on unemployment would bode especially well for oil demand, as U.S. drivers make up more than 10% of global crude consumption.
Nevertheless, the oil market shows few signs of rising demand or tightening supplies. U.S. oil inventories unexpectedly rose last week, while gasoline and diesel inventories are well above average.
"This is an emotional roller coaster based on expectations that are hard to quantify," said Phil Flynn, senior market analyst at PFGBest. "Even if the economy will recover, there is plenty of oil to meet explosive demand."
Some of the world's largest oil companies have offered outlooks at odds with the rallying oil market. "In the near term, it is difficult to predict the timing of global economic recovery," said Dave Rosenthal, vice president for investor relations at Exxon Mobil in a conference call, later adding, "it's too early for us to call a bottom on anything."
Exxon reported a 66% drop in second-quarter profit from a year earlier. Royal Dutch Shell also reported sharply lower profits on Thursday.
Goldman Sachs Group, one of the largest banks active in commodity markets, played down demand concerns that led to Wednesday's drop. In a report, it reiterated a call for oil to hit $85 a barrel by year end, as major economies are beginning to stabilize.
In other commodity markets:
NATURAL GAS: Futures rose more than 5%, propelled by a slightly smaller-than-expected buildup in inventories and as economic-recovery hopes were rekindled as encouraging unemployment data and better-than-expected company earnings lifted equities. Nymex gas for September delivery settled 19.5 cents, or 5.5%, higher at $3.743 a million British thermal units.
SUGAR: Prices on the ICE Futures U.S. exchange soared to 3½-year highs as expectations for smaller harvests in India and Brazil continued to feed the bullish atmosphere. Heavy buying from speculative funds helped. October sugar rose as high as 18.91 cents a pound before settling at 18.75 cents, a gain of 0.19 cent.
Write to Madalina Iacob at madalina.iacob@dowjones.com
