By Barani Krishnan
NEW YORK (Reuters) – Oil prices rallied on Thursday, with U.S. crude up more than 3 percent as indications of strong U.S. demand for gasoline overshadowed news of increased U.S. inventories of crude.
A weaker dollar also made dollar-denominated crude more affordable to holders of the euro, while higher equity prices on Wall Street enhanced bullish sentiment in oil markets.
U.S. Energy Information Administration data on Thursday 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.
Encouragement about gasoline demand outweighed concern 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.
Concern about the rise in crude inventories was also mitigated by a drawdown in crude stockpiles at the Cushing, Oklahoma delivery point for U.S. crude.
U.S. crude futures’ front-month contract (CLc1) was up $ 1.45, or 3.3 percent, at $ 45.60 a barrel by 1:45 p.m. EDT, after rising to a session high of nearly $ 46.
The front-month in Brent, the global oil benchmark, rose 98 cents, or about 2 percent, to $ 48.56, after a session high at $ 48.92.
“Demand … remains strong year-over-year as consumers take advantage of low gasoline and distillate prices,” said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland.
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. That was the 42nd consecutive month of declines in the PPI, and 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 to 1.7 million vehicles, the fifth straight monthly drop as the slowest economic expansion in 25 years wiped out growth in the world’s top auto market.
Oil prices have fallen by over half since June 2014 from a global supply glut reinforced by the slowdown in China and other Asian economies, which have been the main growth engine for commodities.
Keeping pressure on prices, producer group OPEC has kept the spigots open to protect market share. Sources said Thursday top oil exporter Saudi Arabia was disinclined to hold a summit of oil producing countries if the discussions would fail to produce concrete action towards defending oil prices.
(Additional reporting by Ron Bousso in London and Henning Gloystein in Singapore; Editing by Dale Hudson, William Hardy, W Simon and David Gregorio)
