NEW YORK (Reuters) - Oil prices rallied on Thursday, with U.S. crude settling up 4 percent as indications of strong demand for gasoline overshadowed a report showing increased U.S. crude inventories.
A weaker dollar also made dollar-denominated crude more affordable to holders of the euro, while gains on Wall Street enhanced bullish sentiment in oil markets.
U.S. Energy Information Administration data showed demand for gasoline over the latest four-week period was up almost 4 percent from a year ago, bullish for late-summer consumption of the motor fuel. Gasoline inventories, meanwhile, rose just about half of expected levels last week.
“Demand ... remains strong year over year as consumers take advantage of low gasoline and distillate prices,” said Chris Jarvis, an analyst at Caprock Risk Management in Frederick, Maryland.
Encouragement about gasoline demand outweighed concerns over data showing U.S. crude oil stockpiles rose nearly 2.6 million barrels last week, more than double the build of 933,000 barrels forecast by analysts in a Reuters poll.
Worries about the rise in crude inventories was also alleviated by a drawdown in crude stockpiles at the Cushing, Oklahoma, delivery point for U.S. crude.
The U.S. crude front-month contract CLc1 settled up $1.77, or 4 percent, at $45.92 a barrel, after briefly topping $46.
The front-month for Brent, the global oil benchmark, settled up $1.31, or 2.8 percent, at $48.89 a barrel.
Earlier, oil was down in Asian trading after the region’s biggest economy, China, reported a near 6 percent drop in its producer price index in August, the biggest drop since the depths of the global financial crisis in late 2009.
Car sales in China fell 3 percent in August from a year earlier, the fifth straight monthly fall as the slowest economic expansion in 25 years wiped out growth in the world’s top auto market.
Oil prices have tumbled by over half since June 2014 from a global supply glut reinforced by the slowdown in China and other Asian economies - the main growth engine for commodities.
Keeping pressure on prices, producer group OPEC has kept the spigots open to protect market share. Sources told Reuters top oil exporter Saudi Arabia was disinclined to hold a summit of oil-producing countries if the discussions failed to produce concrete action toward defending oil prices.
Additional reporting by Ron Bousso in London and Henning Gloystein in Singapore; Editing by Dale Hudson, William Hardy, W Simon, David Gregorio and Jeffrey Benkoe