Oil futures jumped to their highest level in three months Thursday, bolstered by concerns about tightening U.S. supplies and signs of progress toward resolving Europe's debt crisis.
Light, sweet crude for December delivery settled up $2.04, or 2.1 percent, to $97.78 a barrel on the New York Mercantile Exchange, its highest finish since late July. Brent crude on the ICE futures exchange recently rose $1.17, or 1.1 percent, to $113.48 a barrel.
Market participants singled out the steep decline in U.S. oil inventories in recent weeks as fueling Thursday's rally. The even steeper drop in distillates, a broad category that includes heating oil and diesel, has grabbed traders' attention, especially as they look ahead to the start of winter and the likely ramp-up in heating oil demand.
"We're headed into winter and demand is picking up," said Tom Bentz, a director at BNP Paribas Commodity Futures in New York. "There's a concern that demand could outstrip supply."
December heating oil finished 5.25 cents, or 1.7 percent, higher at $3.1511 a gallon.
U.S. distillate inventories plunged 6 million barrels last week, according to the most recent data from the Department of Energy. Stockpiles of the fuel have plunged nearly 12 percent over the last month, due in large part to rising exports and soaring demand overseas.
Although the DOE released its weekly inventory survey Wednesday, traders renewed their focus on the data amid a lack of broader economic headlines.
"We haven't been this tight in distillate inventories going into winter in years," said Phil Flynn, analyst at brokerage PFG Best in Chicago.
Falling U.S. oil and fuel inventories have been a major driver of the rise in oil prices in recent months. Since the beginning of October, Nymex crude futures have surged more than 23 percent and have recently begun closing in on the key $100-a-barrel psychological threshold.
Nymex futures have crossed the $100 mark several times already this year, only to be yanked lower by broader economic concerns. Analysts said the global economy still remains too fragile to support prices above $100, although a push toward that level remains likely in the coming days.
"At $100 crude, it's going to be tough to maintain," said Carl Larry, president of Oil Outlooks and Opinions, a trading advisory, in New York. "It's a fine line we're walking here between recovery and inflation."
Oil prices were also underpinned by signs of political progress in the euro zone. On Thursday, Greece named former European Central Bank Vice President Lucas Papademos as its next prime minister, paving the way for the country to accept its latest bailout.
In Italy, political forces coalesced around the possibility of an emergency government led by Mario Monti, Europe's former top antitrust regulator. The country was racing to restore political stability and curb its soaring rise in borrowing costs.
Oil market participants have been closely following the crisis in the euro zone because of fears that its sovereign debt problems will translate into weaker economic growth and slower oil demand.
Front-month December reformulated gasoline blendstock, or RBOB, settled down 0.74 cent, or 0.3 percent, to $2.6368 a gallon.
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