Oil jumped to a one-week high around $75 on Thursday after earnings euphoria injected positive sentiment into Asian equities, reinforcing overnight gains triggered by an industry report showing U.S. crude inventories plunged last week. The euro surged to a two-month high and Asian stocks climbed to their highest in more than a week on Thursday after a bullish forecast from State Street a day earlier fuelled optimism about the coming U.S. earnings season and underpinned growing tolerance for risk, sending Wall Street higher. "The fear over a double dip recession or something more dramatic has eased a little bit from a month ago," said Yingxi Yu, a Singapore-based commodities analyst with Barclays Capital. "Market sentiment remains a very important driver. Oil really follows equity markets and other risky assets."
U.S. light, sweet crude rose as much as $1.03 or 1.4 percent to $75.10 a barrel, the highest intraday price since July 1. It was up 76 cents at $74.83 by midday. London Brent crude climbed 68 cents to $74.19. Oil prices are still more than $12 away from a 19-month peak above $87 reached in early May, though they have rebounded by about $10 from a trough below $65 on May 20.
Crude inventories in the United States tumbled by 7.3 million barrels last week, the American Petroleum Institute reported late on Wednesday, more than three times the expected drop. "We have seen a very quick response in the market," Barclays' Yu said. "Perhaps it's a reflection of the temporary closures on the U.S. Gulf coast due to hurricane Alex." Stockpiles fell after Hurricane Alex forced some producers in the U.S. Gulf to curb production and Mexico to close loading terminals that send most of their output to U.S. refiners. A tropical depression could form over the northwestern Gulf of Mexico before reaching the Texas-Mexico border on Thursday, a region still recovering from Alex, the U.S. National Hurricane Center said late on Wednesday. Government statistics on U.S. oil inventories and demand from the Energy Information Administration follow the API data on Thursday at 1500 GMT.
"We have to wait and see what the EIA tells. If it's a confirmation, it would provide support to the market in the short term," Yu said. Expectations are for crude stockpiles to have dropped 2.3 million barrels, according to a Reuters survey. Gasoline stocks fell 191,000 barrels, the API said, in line with analysts' projections, while distillates including heating oil and diesel fell 1 million barrels, contrary to a forecast for a 1.4 million-barrel gain. BP boss Tony Hayward met with an Abu Dhabi state investment fund on Wednesday, part of a quest for cash to ward off takeovers and help pay for the worst oil spill in U.S. history.
