Oil up to near $85, breaking 5-day losing streak
Oil prices rose to near $85 a barrel Wednesday, breaking a five-day slide as rising global stock markets and a weaker dollar boosted investors' appetite.
By early afternoon in Europe, benchmark crude for May delivery was up 89 cents to $84.94 a barrel in electronic trading on the New York Mercantile Exchange. The contract dropped 29 cents to settle at $84.05 on Tuesday.
The Dow Jones industrial average rose to a fresh 18-month high Tuesday. And after Intel Corp. reported better-than-expected earnings late Tuesday, most Asian and European stock indices were higher Wednesday.
Oil traders often look to equities as a barometer of overall investor sentiment.
"This market does not yet appear poised to fully decouple from the financial markets," Ritterbusch and Associates said in a report. It said sustained lower oil prices "could remain elusive as long as the stock market continues claw its way up into new high territory."
A report saying U.S. gasoline supplies rose unexpectedly last week, which suggests demand remains weak, helped weigh on crude prices.
Gasoline inventories rose last week by 1.6 million barrels, the American Petroleum Institute said late Tuesday. Analysts had expected a fall of 1.3 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
Inventories of crude and distillates also rose, the API said.
The Energy Department's Energy Information Administration is scheduled to announce its supply report -- the market benchmark -- later Wednesday.
Analysts also said that crude was still at the center of attention for speculators, with trading volumes on NYMEX for West Texas intermediate crude -- a market benchmark -- reaching 1.42 million contracts, or 1.42 billion barrels, on Tuesday.
"This means that the trading volumes of only one type of crude oil exceed global daily consumption by more than (15 times)," said a report from Commerzbank in Frankfurt. "In our view, financial investors' strong interest is the main reason why crude oil prices have decoupled themselves too much from the fundamental data."
The weaker dollar, which makes crude cheaper for investors holding other currencies, also helped lift prices.
The euro rose to $1.3605 on Wednesday from $1.3594 late Tuesday in New York, as it continued to strengthen in the wake of the weekend's rescue plan for Greece. The British pound advanced to US$1.5420 from US$1.5375.
Uncertainties about the global recovery also were confirmed by a new OPEC report forecasting a drop in demand of 100,000 barrels a day for its crude this year, to 28.8 million barrels.
The report also said demand in 2009 contracted by 2.3 million barrels a day compared to 2008, before the recession fully hit.
In other Nymex trading in May contracts, heating oil rose 0.77 to $2.2219 a gallon and gasoline rose 0.07 cent to $2.3100 a gallon. Natural gas fell 2.5 cents to $4.135 per 1,000 cubic feet.
In London, Brent crude advanced 69 cents to $85.41 on the ICE futures exchange.