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Oil rises as equities bounce, dollar weaker
NEW YORK |
NEW YORK (Reuters) - Oil rose on Wednesday for the first time in three sessions, bouncing with equities and supported by a weaker dollar as concerns over the European banking system eased and investors cautiously bought riskier assets.
"The complex advanced by about 0.7 percent today with some help from an upswing in risk sentiment," Jim Ritterbusch, president at Ritterbusch & Associates in Galena, Illinois, said in a note.
The focus shifted to fundamentals late on Wednesday when industry group American Petroleum Institute reported U.S. crude oil inventories fell 7.3 million barrels last week, against a forecast for stockpiles to have risen.
U.S. crude for October delivery rose 58 cents, or 0.78 percent, to settle at $74.67 a barrel, having traded from $73.37 to $75.39. In post-settlement trading, crude futures extended those gains after the API data, trading at $74.88, up 79 cents at 5:05 p.m. EDT (2105 GMT).
The API reported gasoline stocks rose 654,000 barrels and distillates, which include diesel fuel and heating oil, rose 1.3 million barrels.
U.S. crude inventories had been forecast to be up 900,000 barrels, according to a Reuters poll ahead of the API report on Wednesday.
A 600,000-barrel increase in distillate stockpiles and a 900,000-barrel decline in gasoline supplies were also forecast. The U.S. Energy Information Administration's report will arrive at 11 a.m. EDT (1500 GMT) on Thursday.
The ICE Brent crude contract witnessed active trade for a second day running as the October contract rose 43 cents to settle at $78.17, having earlier hit a one-month high of $78.85.
The premium for Brent crude to the U.S. contract narrowed slightly to $3.50 a barrel after earlier reaching $3.91, its highest since mid-May and widening by $2 in just three sessions as the U.S. market sagged under the weight of bulging inventories. (Graphic: link.reuters.com/qak32p)
Maintenance at North Sea fields and a strong Urals crude market have also contributed to Brent's premium.
European shares reversed early losses and Wall Street gained in another low-volume session, helped by a successful Portuguese debt offering that eased risk aversion. .N
The euro recovered and rose against the dollar and the yen after Ireland's finance ministry said the nationalized Anglo Irish Bank will be split into a funding bank and an asset recovery bank to wind down its assets.
The successful bond auctions in Portugal also helped the euro. The dollar index .DXY was weaker, slipping after early strength.
"Equity markets are bouncing today, which is some support for the crude market, and there's chatter about forward buying as a bet on 2011 economic recovery," Tim Evans, analyst at Citi Futures Perspective in New York, said in a research note.
A raised forecast for 2010 global oil demand and lowered forecast for non-OPEC crude oil production growth in 2010, both issued by the U.S. Energy Information Administration on Wednesday added to the bullish sentiment.
While boosting the 2010 demand growth forecast by 50,000 barrels per day, the EIA lowered its forecast for 2011 demand growth by 100,000 bpd.
With little disruption to energy operations from tropical weather so far this season, the U.S. National Hurricane Center was monitoring newly formed Tropical Storm Igor and two other systems in the Atlantic Ocean. The systems were not yet expected to threaten energy operations in the Gulf of Mexico.
(Additional reporting by David Sheppard and Gene Ramos in New York, David Turner and Marie-Louise Gumuchian in London and Alejandro Barbajosa in Singapore; Editing by Lisa Shumaker)
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