Oil tops $74 on expected U.S. inventory drop

By Brian Ellsworth

NEW YORK (BestGrowthStock) – Oil prices rose on Wednesday after six straight sessions of losses, lifted by hopes of a strong earnings season and expectations that stock data will show a drop in U.S. crude inventories.

U.S. crude closed up $2.09, or 2.9 percent, to $74.07 per barrel, posting its biggest percentage gain since June 25. It closed at $71.98 Monday, the lowest since early June. ICE Brent crude futures were up $2.06 at $73.51.

Weekly U.S. oil data from industry group American Petroleum Institute at 4:30 p.m. EDT Wednesday and the U.S. Energy Information Administration due on Thursday are expected to show a sizable draw on crude oil stocks.

“You have the expectation of an inventory draw. You’ve got equities up and you haven’t had any real negative economic news today — for a change – so markets are all up today,” said Tom Bentz, a broker at BNP Paribas Commodity Futures Inc, in New York.

He added crude got some technical support as it started to head closer to $70 per barrel, following several weeks of trading within the same range.

Crude also drew support from a broad rally in equity markets that sent the Dow Jones Industrial average up 2 percent. A higher profit outlook from State Street Corp bank made equities markets more optimistic about global economic growth, which could spur more demand for oil. (.N: )

Traders were also eyeing a low pressure system near Mexico’s Yucatan Peninsula that has a 50 percent chance of developing into a tropical depression, which could threaten oil and gas production.

INVENTORIES TO FALL

U.S. oil data for the week to July 2 will likely show a drop of 2.3 million barrels in crude stocks, a fall for the second consecutive week, due to lower imports in the United States, a Reuters poll of analysts showed.

Gasoline inventories were forecast down 200,000 barrels.

The release has been delayed by one day due to the U.S. Independence Day holiday Monday.

Oil markets have been trading consistently in line with equities markets in recent weeks. Oil prices rallied in early trading on Tuesday but slumped into negative territory after stocks pared losses.

“More than anything else, it’s the strength of the equity markets that are supporting crude oil markets,” said Robert Yawger, senior vice president, energy futures at MF Global in New York.

Euro zone economic growth in the first three months of 2010 was confirmed Wednesday at 0.2 percent quarter-on-quarter and 0.6 percent on the year, European Union statistics office Eurostat said, but any stronger expansion in the second quarter could be short-lived.

The rate of growth in the U.S. non-manufacturing sector slowed more than expected and hit its lowest since February, the Institute for Supply Management said on Tuesday.

(Reporting by Gene Ramos in New York and Alejandro Barbajosa in Singapore; editing by Marguerita Choy, Sofina Mirza-Reid and Lisa Shumaker)

Oil tops $74 on expected U.S. inventory drop