Oil extended gains to touch a two-week high above $75 today, heading for the first weekly gain in almost a month, aided by rallying stock markets and expectations of rising US consumption as holidaymakers take to the roads.
Prices posted their biggest two-day gain since mid-August over the past two days following data that showed an increase in fuel demand in the world's top consumer, the United States, and China's assurance that Europe remains a key investment market for its foreign-exchange reserves.
US crude for July delivery rose 86 cents to $75.41 a barrel, reasserting a premium over ICE Brent, which climbed 58 cents to $75.24. Prices were up 7 per cent so far this week.
Prices dropped to $67.15 just three days ago, the lowest level since September, excluding a May 20th trough below $65 as the June contract expired.
Oil prices were also being supported by a rally in stock markets. Exporters led the Nikkei up 1.8 per cent today, following a Wall Street rally the previous day on China's reassurance that Europe remains a key investment market.
Traders also focused on forecasts for an intense Atlantic hurricane season, which revived concern of disruption to supplies in the Gulf of Mexico, where BP's attempt to plug a gushing oil well was proceeding to plan.
In its first outlook for the hurricane season that begins in June, the US National Oceanic and Atmospheric Administration forecast 14 to 23 named storms, with eight to 14 turning into hurricanes, nearly matching 2005's record of 15.
Hurricanes Katrina and Rita devastated offshore oil fields and refineries across Louisiana and Texas in 2005, causing the most severe disruption to supplies related to a natural disaster.
The US driving season, when motor fuel demand reaches its annual peak, starts this weekend with the US Memorial Day holiday, running until Labour Day in early September.
US diesel demand for trucking and industry is also rising, a weekly government report showed on Wednesday.
Oil demand in the US climbed almost 7 per cent over the past four weeks, the Energy Information Administration said, led by a 16 per cent jump in demand for distillates, a category that includes diesel and heating oil.
The US economy grew at a slightly slower pace than previously estimated in the first quarter but the recovery still appeared solid, suggesting the economy could withstand fallout from the European debt crisis.
China's central bank on Thursday said a Financial Times report on Wednesday that Beijing was concerned about its euro-zone bond holdings was groundless.
Industry data provider Genscape yesterday said crude inventories at the US pricing point of Cushing, Oklahoma hit another record high in the week to May 25th, rising 478,000 barrels to 39.9 million barrels, from a week earlier.
Reuters