NEW YORK (Reuters) - Oil rallied on Thursday to end at its highest level in two weeks on upbeat U.S. economic data and greater risk appetite as Greece neared a bailout deal.
Crude rose for a second straight day and breached $85 a barrel, part of a broad advance across commodities markets, as risk appetite was whetted up by the euro’s jump against the greenback.
Energy markets were also aided by the Federal Reserve on Wednesday pledging to hold key interest rates at low levels for a longer period.
The Fed’s statement lifted Wall Street higher as Greece neared a bailout deal, while fewer jobless benefit claims and rosier earnings supported expectations of a sustainable economic recovery. <.
“The energy market again hitched a ride on the coattails of a strong up-move in equities as economic optimism returned as primary mover of oil prices,” said Jim Ritterbusch, president of Ritterbusch & Associates, trading consultants in Galena, Illinois.
In the United States, crude for June delivery settled up $1.95, or 2.3 percent, at $85.17 a barrel.
In London, the ICE Brent June crude ended 74 cents higher, or 0.86 percent, at $86.90.
The euro gained for a second straight day, rebounding from a one-year low against the dollar in the prior session on the Greek bailout plan, making dollar-denominated oil cheaper for buyers of other currencies. <USD/>
Brent’s premium to U.S. benchmark West Texas Intermediate narrowed to $1.73 at the close, after ending at $2.94, on Wednesday, during which it went as high as $3.65, the widest since August 14, 2009.
Crude prices have risen even though total U.S. crude stockpiles rose by 1.9 million barrels in the week to April 23, the Energy Information Administration said on Wednesday, nearly double what analysts had expected. <EIA/S>
The supply glut, particularly at the Cushing, Oklahoma delivery hub for oil traded on the New York Mercantile Exchange, has depressed the front-month oil contract against more distant futures contracts, resulting in a wider contango.
Oil stored the hub rose by 1.2 million barrels to 36.8 million barrels in the week to April 27, according to a report Thursday from energy industry data provider Genscape.
That was the highest level since the company began to report them in May, 2009, said Genscape.
EIA data on Wednesday showed Cushing storage rose in the week to April 23 by 500,000 barrels to 34.6 million barrels.
Gasoline futures in New York rose more than 1 percent.
U.S. gasoline demand jumped 3.1 percent in the past four weeks from a year ago, causing an unexpected 1.2 million-barrel drop in gasoline inventories last week, EIA data showed.
The news raised expectations for a healthy demand growth during the summer driving season, which starts in May.
“There’s still a feeling that demand is robust and that the broad outlook is good,” said oil broker Christopher Bellew at Bache Commodities, who also highlighted strong growth in Asian countries such as China.
The euro zone sovereign debt turmoil deepened on Wednesday after rating agency Standard & Poor’s cut Spain’s credit status a notch, a day after lowering Greece debt to junk status and downgrading Portugal.
But the market is now hopeful that help for Greece can be swiftly carried out to prevent contagion, after German Chancellor Angela Merkel threw her weight behind a deal.
Additional reporting by Emma Farge in London; Janet McGurty and Joshua Schneyer in New York; and Alejandro Barbajosa in Singapore; Editing by Lisa Shumaker