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Oil rises above $104 in Europe after surprise US crude supply drop
LONDON (AP) ' Oil prices rose above $104 a barrel Wednesday after a report showed U.S. crude supplies unexpectedly fell, suggesting demand may be improving, and strong corporate earnings helped sentiment in financial markets.
Benchmark oil for June delivery was up 65 cents to $104.20 a barrel by midafternoon European time in electronic trading on the New York Mercantile Exchange. The contract rose 44 cents to settle at $103.55 in New York on Tuesday.
Brent crude for June delivery was down 50 cents at $117.66 per barrel in London.
The American Petroleum Institute said late Tuesday that crude inventories fell 1.0 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had predicted an increase of 1.5 million barrels.
Crude supplies have jumped more than analyst forecasts for the previous four weeks. The Energy Department's Energy Information Administration reports its weekly supply data later Wednesday.
"If the Energy Department corroborates, this would be a bullish number," energy trader and consultant The Schork Group said in a report.
Inventories of gasoline fell 3.6 million barrels last week while distillates also tumbled 3.6 million barrels, the API said.
Upbeat earnings reports from companies like Appple Inc. helped equities rise, improving investor sentiment across financial markets. Delta, Boeing and Caterpillar also beat expectations, suggesting consumer demand is resilient.
Stronger U.S. crude demand could offset weakness in Europe where the region's debt crisis may force further government spending cuts that would hurt economic growth. Capital Economics expects Europe's economy to shrink 1 percent this year and 2.5 percent in 2013.
"Large parts of the eurozone are fundamentally uncompetitive and have unsustainable debt burdens," Capital Economics said in a report. "We still expect some form of eurozone break-up to begin in the coming year or so."
Investors will also be closely watching comments by the U.S. Federal Reserve about the strength of the recovery and monetary policy after its meeting Wednesday.
In other energy trading, heating oil was up 1.8 cents at $3.15 per gallon and gasoline futures rose 0.5 cents at $3.16 per gallon. Natural gas rose 2.6 cents to 2.0 per 1,000 cubic feet.