Oil prices rose to near $78 a barrel Wednesday, lifted by gains in stock markets which suggested demand for crude could improve. By early afternoon in Europe, benchmark crude for September delivery was up 36 cents to $77.94 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 68 cents to settle at $77.58 on Tuesday. Other factors driving crude higher were a drop in crude inventories, indicating an upturn in demand, and a forecast from the U.S. National Hurricane Center that this year's hurricane season could be the most intense since 2005 and possibly affect supplies. The American Petroleum Institute late Tuesday said crude inventories fell 241,000 barrels last week. The Energy Department's report on weekly supply data later Wednesday was also expected to show an inventory decline. Oil traders are studying stock markets, and especially corporate earnings, as a sign of overall investor sentiment. When stock markets rise, oil often does too. Commerzbank said in a note to investors that "the events on financial markets, especially on the U.S. equity market, and the macro data will determine what happens on the oil market in the near term." Traders were also keeping a close watch on on what U.S. Federal Reserve chairman Ben Bernanke tells lawmakers about economic prospects in his half-yearly testimony Wednesday. In other Nymex trading in August contracts, heating oil rose 1.18 cents to $2.0365 a gallon, gasoline gained 1.34 cents to $2.0920 a gallon and natural gas was up 1.4 cents to $4.604 per 1,000 cubic feet. Brent crude was up 26 cents to $76.58 a barrel on the ICE futures exchange. ------ Associated Press writer Alex Kennedy in Singapore contributed to this report.

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