Crude oil futures prices followed other markets higher Wednesday on speculation about potential Federal Reserve easing measures and increasing commitments by investors to swap Greek debt.
Light, sweet crude for April delivery settled $1.46 higher at $106.16 a barrel on the New York Mercantile Exchange, bouncing back from as low as $104.35 earlier in the session. Brent crude on the ICE futures exchange traded $1.85 higher at $124.17 a barrel.
A broad market rally pulled oil higher after a Wall Street Journal report that the U.S. Federal Reserve has added to its potential options with regard to future bond-buying programs, though it hasn't decided to embark on another round of so-called "quantitative easing."
Meanwhile, investors were encouraged by progress on a deal to swap Greek debt, which lowered concerns of further euro-zone economic turmoil that has already cut growth in the region.
The euro was recently higher at $1.3149, from $1.3112 late Tuesday, while the Dow Jones Industrial Average gained 89 points to recently trade at 12847.
Worries about the euro-zone debt crisis have helped to restrain oil prices in recent months, though tensions with Iran have pushed prices in the other direction, with crude hitting a nine-month high of nearly $110 a barrel at the end of February.
Analysts said that both factors continue to create big swings in the oil market.
"The situation with Greek debt is not resolved, Iran is not resolved, and as long as things remain murky, they have the ability to engender a great deal of volatility," said Jason Schenker, head of Prestige Economics.
The report on the Fed and Greek debt trumped government data that showed a continued dropoff in U.S. fuel consumption coupled with a smaller increase in crude inventories than analysts and an industry group had forecast.
The weekly report from the U.S. Energy Information Administration showed declines in demand for gasoline and distillate, a category that includes heating oil and diesel fuel. The data suggested that high prices are only adding to a long-term trend of declining domestic fuel consumption.
EIA data showed four-week gasoline demand fell 7.8% from a year earlier, the biggest ever year-over-year decline since records began in 1991.
Still, crude oil inventories rose by a modest 800,000 barrels, a relief for some traders after the American Petroleum Institute, an industry group, said late Tuesday that stockpiles rose by 4.6 million barrels last week.
Tony Rosado, a broker with GA Global Markets, cautioned that weak demand and rising stockpiles should keep a lid on prices.
"We seem to be well-supplied," he said.
Front-month April reformulated gasoline blendstock, or RBOB, settled 5.75 cents higher at $3.2874 a gallon. April heating oil settled 3.12 cents higher at $3.2194 a gallon.
Copyright (c) 2012 Dow Jones & Company, Inc.
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