Oil prices rose above $75 a barrel Wednesday, boosted by a weaker dollar. But gains were limited by a report showing an unexpected rise in U.S. supplies last week, a sign demand for crude may not be improving.
By early afternoon in Europe, benchmark crude for November delivery was up 24 cents to $75.21 a barrel in electronic trading on the New York Mercantile Exchange.
On Tuesday the contract fell $1.22 to settle at $74.97. The October contract expired Tuesday, losing $1.34 to settle at $73.52.
The dollar's skid against the euro was caused by speculation that the U.S. Federal Reserve could push interest rates lower, making investments in dollars less attractive.
A weaker dollar makes crude priced in dollars cheaper for investors holding other currencies.
The euro was up to $1.3378 on Wednesday from $1.3249 late Tuesday in New York, while the British pound rose to $1.5699 from $1.5625, and the dollar slipped to 84.58 Japanese yen from 85.06 yen.
The American Petroleum Institute said late Tuesday that crude inventories rose 2.2 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had forecast a drop of 1.5 million barrels. Inventories of gasoline and distillates also rose, the API said.
"The fact remains that U.S. oil demand is still very weak despite the end of the recession," said analysts at Commerzbank in Frankfurt.
The Energy Department's Energy Information Administration reports its weekly supply data later Wednesday.
Some traders expect the Energy Department's data to be closer to the analysts' forecast. The API data is collected voluntarily from refineries and storage facilities while the government's report is mandatory.
"This should be a very bearish report, if we bought it," energy consultancy and trader The Schork Report said. "As it stands, huge discrepancies often exist between the API and DOE report, and we have the feeling this is going to be one of those weeks."
While crude demand in the U.S. may be sluggish, consumption in emerging economies has been robust this year. Chinese oil consumption grew 7.6 percent in August from a year earlier, Platts said.
"Despite the cautious outlook on oil demand still often expressed in market sentiment, the actual flow of data continues to point to extremely robust global demand indications," Barclays Capital said in a report.
In other Nymex trading in October contracts, heating oil rose 0.83 cent to $2.1282 a gallon and gasoline gained 0.63 cent to $1.9259 a gallon. Natural gas rose 2.1 cents to $3.940 per 1,000 cubic feet.
In London, Brent crude rose 22 cents to $78.64 a barrel on the ICE Futures exchange.
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Associated Press writer Alex Kennedy in Singapore contributed to this report.
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