BUSINESS

Oil prices up again on economic hopes, lower stockpiles, supply concerns

12/22/2011 11:18 EST | Updated 02/21/2012 05:12 EST
NEW YORK, N.Y. - Oil prices neared US$100 a barrel Thursday amid signs of growing U.S. crude demand and concerns about global supply.

Benchmark West Texas Intermediate crude rose 73 cents to US$99.40 per barrel in midday trading in New York. Brent crude, which is used to price crude produced in many other countries and is an important feedstock for U.S. gasoline producers, rose 20 cents to US$107.91 a barrel in London.

A string of positive reports in the United States suggested that the U.S. economy is improving. That has sent stock and oil prices higher this week, with crude up for a fourth consecutive day.

Investors got a double barrel of encouraging news Thursday as the U.S. Labour Department said unemployment claims last week dropped to the lowest level in more than three and a half years, and a private report said leading economic indicators pointed to a strengthening economy.

On Tuesday, a report showed housing construction was picking up in the U.S. and on Wednesday the Energy Information Administration reported a dramatic drop in U.S. oil supplies last week.

Gasoline demand was down 2.6 per cent from last year through the first nine months of the year, according to government data. Drivers cut back amid high pump prices and worries about the economy.

"That's an astonishing amount," said Andrew Lipow, an independent oil analyst.

He expects gasoline demand to fall slightly next year, though the decline won't be as great if the economy improves.

Demand for oil and gasoline grows with the economy as shippers move more goods and consumers drive and fly more.

Oil prices are also being pushed higher by threats to global supplies. Rising tensions between the West and Iran over Tehran's reputed nuclear ambitions are raising fears that oil from the world's fourth-biggest producer may be kept from reaching markets in the coming weeks.

Oil traders also are concerned about political instability in Kazakhstan, which exports about 1.3 million barrels of oil per day, about 1.5 per cent of world demand. The Central Asian country has been battling political protests that have resulted in more than a dozen deaths in the last month.

Meanwhile, Royal Dutch Shell PLC had to shut a large field off the coast of Nigeria because of a leak.

In other energy trading, heating oil was virtually unchanged at US$2.1933 a U.S. gallon (3.79 litres), and gasoline futures rose one cent to US$2.6324 per gallon. Natural gas was little changed at US$3.158 per 1,000 cubic feet.

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