REUTERS-Oil prices
were driven 2 percent higher by an ongoing rally in the U.S. stock market on
Thursday, although gains were capped by plentiful supplies and
bulging
inventories in spite of efforts by producers to cut output.
U.S. light
crude futures were up $1.22 to $53.97 a barrel, a gain of 2.2 percent, while
Brent crude rose $1.25, or 2.3 percent, to $56.33 by 10:49 a.m. ET (1549 GMT).
Oil popped
with U.S. crude hitting $54.0, its highest level in more than three weeks, as
the U.S. equity market opened at 9:30 a.m. ET and stocks added slightly to
Wednesday's rally that saw the Dow Jones Industrial Average close above 20,000
for the first time. [.N]
"Return
of risk appetite in the financial market has helped Brent and WTI crude
futures," said Abhishek Kumar, senior energy analyst at Interfax Energy's
Global Gas Analytics in London.
The dollar
index was also up 0.6 percent, but its recent weakness - it has lost 3 percent
since peaking in January - has also supported oil. Oil is traded in the U.S.
currency and a weaker dollar makes fuel purchases less costly for countries
using other currencies, potentially spurring demand.
Oil's gains
were held back by Wednesday's weekly U.S. inventory figures, which showed an
increase of 2.8 million barrels last week in U.S. crude inventories to 488.3
million barrels, pointing to ample supply in the world's biggest market.
Gasoline
inventories rose sharply, putting current stocks at 253 million barrels,
highest of the century for this time of year. That has caused refining margins
to wither; the U.S. refined product crack spread has fallen to $12.79 a barrel,
lowest since November.
U.S. crude oil
production has risen by 6.3 percent since the middle of last year to 8.96
million barrels per day (bpd).
Rising U.S.
output and inventories are likely to limit the effectiveness of the agreement
by the Organization of the Petroleum Exporting Countries and other producers,
including Russia, to cut supplies in an effort to reduce a global glut.
The two
benchmark crudes have stayed within fairly narrow trading ranges since OPEC
agreed to limit production, but that may not last if U.S. production continues
to rise.
"We still
believe there are more arguments in favor of prices breaking out of their
current corridor and embarking on a downward trajectory," said Carsten
Fritsch, senior commodities analyst at Commerzbank in Frankfurt.
OPEC and other
exporters have said they will reduce output by almost 1.8 million bpd during
the first half of 2017. Industry data suggest many of those cuts have already
been made.
REUTERS
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