London: Oil rose to trade near $85 a barrel on Wednesday, ending a five-day losing streak, as optimism about the economy outweighed forecasts for a further rise in US inventories.
European shares rose to the highest in more than 18 months, led by the banking sector after JPMorgan Chase & Co reported a jump in first-quarter earnings. The improvement in risk appetite also weakened the dollar.
“It seems that the economies are improving around the world, not only in the emerging markets,” said Daniel Briesemann, analyst at Commerzbank, adding that was “definitely” supportive for oil and commodities.
US crude gained 80 cents to $84.85 a barrel by 1254 GMT, within sight of an 18-month high above $87 reached last week. Brent rose 78 cents to $85.50, trading at a premium to the US benchmark for a third straight day.
The US government’s Energy Information Administration issues its snapshot of supplies in the world’s largest consumer at 1430 GMT. Analysts expect a 1.5 million-barrel rise in crude oil stocks.
On Tuesday, industry group the American Petroleum Institute (API) said crude supplies posted their 11th consecutive increase and reported a surprise boost in gasoline stocks.
“Inventories are showing a bearish fundamental picture, but as long as the US equity market is steady and economic indicators are showing good numbers, I don’t think prices will fall much,” said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd, who sees oil between $83-$88 in coming weeks.
Adding to hopes that economic recovery is gaining momentum, eurozone industrial output rose more than expected in February, data showed on Wednesday. Sales at US retailers rose more strongly than expected in March.
OPEC in its monthly report said economic optimism was driving prices and that it saw a “very comfortable outlook” for oil’s fundamentals. The group also nudged up its forecast for 2010 oil demand growth.
While rising crude stocks in the United States are an indicator of tepid fuel demand, the International Energy Agency said on Tuesday global demand will rebound sharply this year to record levels.
Support for oil prices could come from China’s GDP data to be published on Thursday, Emori said, while a potential appreciation of the yuan would also boost values because it would increase the country’s purchasing power of dollar-denominated commodities.
China’s economy will grow faster in 2010 and 2011 than previously forecast thanks to a better-than-expected global recovery and strong investment momentum at home, a Reuters poll showed.