Oil rises on dollar, weighs OPEC and U.S. inventories
NEW YORK (Reuters) - Oil rose on Thursday in volatile trading as the weaker dollar outweighed news OPEC was mulling hiking its output target and rising U.S. inventories.
Markets were closely watching comments from OPEC sources, who said the group could lift production targets by up to 1.5 million barrels per day (bpd) when it meets on June 8 to help bring down high fuel costs threatening the economic recovery.
Further pressure came from U.S. inventory data, which showed crude inventories last week reached the highest level for this time of year since 2006 amid weak demand.
Crude rallied back as the euro touched a one-month high against the dollar after Moody's said there was a very small but rising risk of a short-lived default by the United States and a report that euro zone officials had agreed in principle on a new adjustment program for Greece.
Support also came from news of an explosion and fire at Chevron's (CVX.N) refinery at Pembroke in Wales.
Brent crude for July delivery rose $1.01 to settle at $115.54 a barrel, rallying after being pressured by the U.S. oil inventory data and pushing the Brent premium to U.S. crude to over $15 a barrel.
U.S. July crude edged up 11 cents to settle at $100.40 a barrel.
"It's another bail out boost. The dollar also got hammered by the Moody's warning about U.S. default and the Pembroke fire definitely provided some lift," said Phil Flynn, analyst at PFGBest Research in Chicago.
OPEC MULLS RAISING TARGETS
Ahead of OPEC's meeting next week in Vienna, officials said the producer group was considering raising output, possibly by as much as 1.5 million bpd, though one delegate said a 1 million-bpd hike would be the likely outcome.
"Oil prices are too high. $100 oil is scaring people," one delegate said, adding a rise of 1 million bpd in OPEC's output target would result in only a small increase in actual oil supply from the group.
"If this is 1 million bpd on top of the targets from over two years ago, then it's meaningless. If it's 1 million bpd above current production levels, then it's exactly what the market needs," said David Wech, analyst at JBC Energy in Vienna.
Ali Al-Naimi, top OPEC producer Saudi Arabia's oil minister, was cautious, repeating previous comments that the group would lift production if there was more demand for crude.
RISING U.S. INVENTORIES
Even as OPEC members considered increasing output, demand in top consumer the United States remained weak, down 5 percent over the past four weeks compared to a year ago, while U.S. crude stockpiles rose 2.88 million barrels to 373.8 million in the week to May 27, the highest level since late April 2009.
Gasoline inventories jumped 2.55 million barrels are refiners built up their stores ahead of the summer driving season.