By Sara Sjolin and Carla Mozee, MarketWatch
LONDON (MarketWatch) ? Benchmark U.S. crude-oil prices flirted with a 16-month high on Thursday, adding to a prior-day surge of nearly 3% after weekly U.S. supplies logged a larger-than-expected drop.
Oil prices also found support in a dollar grown weaker on the back of news from the U.S. Federal Reserve indicating interest rates will stay low for now.
Crude oil for August delivery /quotes/zigman/2291781 CLQ3 +0.16% ?briefly climbed to $107.45 a barrel, less than 50 cents shy of a 16-month high. The contract was up 46 cents, or 0.4%, at $106.97 a barrel at the latest.
Oil extends its rally on favorable fundamentals.The price move came ahead of a weekly update on U.S. jobless claims, with energy-sector investors monitoring developments in the labor market for signals about energy demand.
Crude prices on Wednesday rallied $2.99, or 2.9%, to $106.52 a barrel on the New York Mercantile Exchange after the U.S. Energy Information Administration said crude stockpiles fell 9.9 million barrels for the week ended July 5. Analysts polled by Platts were looking for a decline of 3.8 million barrels.
The data came after the American Petroleum Institute late Tuesday reported a drop of 9 million barrels for last week.
?Both supply and demand currently appear to be in oil?s favor,? with the ongoing conflict in Egypt contributing to supply-side concerns, CMC Markets sales trader Miguel Audencial told clients Thursday. Read: Oil prices could be the next monster under the bed for the economy
Political unrest and deadly violence in Egypt surrounding last week?s ouster of Mohammed Morsi as president have raised concerns about supply disruptions at the Egyptian-controlled Suez Canal and the Suez-Mediterranean pipeline, a key hub for oil producers.
Oil prices could be next ?monster under the bed? for economy
Oil prices have been rising sharply in recent days, and economists are getting increasingly worried. MarketWatch's Thomas Bemis explains why. (Photo: Getty Images)
Audencial also cited the Organization of the Petroleum Exporting Countries? prediction that global oil demand will pick up pace next year by 1 million barrels a day.
?The weaker U.S. dollar also made the commodity more attractive to investors. With the momentum clearly on crude oil?s side, there are some investors looking at the $110 mark as a possible target,? he said.
The greenback was battered Wednesday, extending losses after Federal Reserve Chairman Ben Bernanke indicated at an appearance in Boston that the U.S. central bank wouldn?t rush to raise interest rates, even after the unemployment rate reaches the Fed?s target of 6.5%. The dollar /quotes/zigman/1652083 DXY -0.02% lost further ground Thursday against its major rivals.
A weaker buck benefits dollar-denominated commodities such as oil as it makes them less expensive for holders of other currencies.
Based on the most-active futures contracts, Wednesday?s Nymex settlement was the highest since late March 2012, according to FactSet data.
Meanwhile, August Brent oil /quotes/zigman/2735836 UK:LCOQ3 +0.0092% ?added 31 cents to $108.81 a barrel Thursday. They had climbed on Wednesday by 70 cents, or 0.6%.
Meanwhile, August gasoline /quotes/zigman/2215996 RBQ3 -0.61% ?slipped 1 cent to $3.01 a gallon, while August heating oil /quotes/zigman/9821417 HOQ3 +0.15% ?added a penny to $3.01 a gallon. Both reached $3 on Wednesday for the first time since April.
The EIA said Wednesday that weekly gasoline supplies fell by 2.6 million barrels, while distillate stockpiles, which include heating oil, increased by 3 million barrels. Gasoline stockpiles were expected to rise by 1.2 million barrels, while distillates were forecast to increase by 1.4 million barrels.
August natural gas /quotes/zigman/2294284 NGQ13 -1.03% ?shed 4 cents to $3.64 per million British thermal units. The EIA is due to release weekly data on natural-gas supplies later Thursday. Analysts polled by Platts forecast an increase of between 80 billion cubic feet and 84 billion cubic feet.
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Sara Sjolin is a MarketWatch reporter based in London. Follow her on Twitter @sarasjolin. Carla Mozee is a reporter for MarketWatch, based in Los Angeles. Follow her on Twitter @MWMozee.
Source: http://www.marketwatch.com/news/story.asp?guid=%7BEA2094EC-E9DC-11E2-8134-002128040CF6%7D&siteid=rss
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