London: Oil rose above $110 a barrel on Thursday as investors looked forward to further measures by the European Central Bank (ECB) to support growth, shrugging off an increase in US crude stockpiles.
The ECB is expected to cut rates to 1% and unveil a new package of bank aid on Thursday, a day ahead of a European Union summit market participants hope will come up with a plan to tackle the region’s debt crisis.
Brent crude rose 59 cents to $110.12 a barrel by 2:52pm, after settling on Wednesday $1.28 lower at $109.53 a barrel. US crude was up 36 cents at $100.85 a barrel.
“Fundamentals are better than expected and the U.S. and Chinese economies seem to be stabilising, but trading will be cautious before Friday’s Europe meeting,” said Tetsu Emori, a fund manager with Astramax Co. in Tokyo.
“The market’s direction will be determined after the summit, and a good result will send prices higher.”
Oil strengthened even after an unexpected rise in US crude inventories, which climbed by 1.34 million barrels last week, versus a forecast for a 600,000-barrel drawdown, government data showed on Wednesday.
European shares rose in early trade on Thursday as investors bet on the ECB rate cut and that a bold plan to help resolve the debt crisis would emerge from Friday’s summit.
Another focus for the oil market will be the 14 December meeting of the Organization of the Petroleum Exporting Countries. With oil well above $100 a barrel, big changes in output policy are not expected.
The prospect of a European Union ban on imports of crude from Iran - OPEC’s second-largest producer - over Tehran’s nuclear work has also been supporting prices.
But top oil exporter Saudi Arabia said on Wednesday was pumping at the highest rate in decades, in what analysts saw as a signal it would meet customer demand with more oil if needed.