By Paddy Gourlay Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Crude oil futures are rallying Thursday alongside rising European equities and the euro, as the market shrugs off record high U.S. oil stockpiles to extend Wednesday's correction. Bargain hunters pushed the market higher Wednesday, snapping a five-day losing streak after U.S. crude futures tumbled below $71 a barrel following the release of a bearish Department of Energy weekly oil inventory report. "Short-covering by speculators betting on crude oil prices falling further were probably also a part of the equation," said Filip Petersson, an analyst at SEB Commodity Research. After a flat overnight session, the rally has continued Thursday morning as the euro climbs above $1.27 against the dollar, and European equities gain. "Before yesterday 10 of the previous 12 days were down days, so a technical correction with weaker dollar and a small bounce in equities isn't really a surprise," said Glen Ward, head of retail derivatives at London Capital Group. At 1058 GMT, the front-month October Brent contract on London's ICE futures exchange is $1.05 higher at $74.53 a barrel. Trade is brisk with around 52,500 lots changing hands. The front-month October contract on the New York Mercantile Exchange, called West Texas Intermediate, is 88 cents higher at $73.40 a barrel. The correction in oil futures Wednesday also coincided with signs of improving demand in Europe. North West European complex refining margins, based on using the physical benchmark crude Dated Brent, improved to $4.89 a barrel Wednesday compared with the four-week average of $1.76 a barrel, according to JBC Energy. Dated Brent also strengthened and Urals, a Russian sour crude, traded at a very high differential. The ICE's gasoil contract for September delivery is $14.25 higher at $634.75 a metric ton Thursday, a gain of 2.3%, outstripping gains in Brent futures. Wednesday's Department of Energy oil inventory data was also not as bearish as the figures first suggested, pointed out Ed Meir of MF Global. Crude stockpiles rose 4.1 million barrels for the week ended Aug. 20, but all the rise occurred in the U.S. Gulf Of Mexico. "However, crude oil inventories at Cushing fell by 779,000 barrels, blunting the impact of the overall increase somewhat," said Meir. The Oklahoma city is the delivery point for West Texas Intermediate. Overall though, commercial U.S. crude and oil product stockpiles rose to another record high. Gasoline stocks rose 2.27 million barrels, and distillate stocks rose 1.76 million barrels. Hurricanes and storms disrupting the oil-producing Gulf of Mexico region this month could relieve the pressure of inventory builds although there are none threatening currently, according to the National Hurricane Center. Market attention will likely focus on the strength of the economic recovery after this week's poor U.S. housing sales figures, analysts said. Weekly U.S. initial jobless claims data will be published at 1230 GMT Thursday. Nymex gasoline for September delivery is 2.87 cents higher at 189.27 cents a gallon.

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