Oil prices edged up to almost $110 a barrel Thursday as the dollar weakened slightly and investors waited for a weekly U.S. crude inventory report for evidence that slowing economic growth has cut demand.
By midday in Europe, light, sweet crude for October delivery was up 64 cents to $109.99 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 36 cents overnight to settle at $109.35.
In London, October Brent crude gained 68 cents to $108.74 a barrel on the ICE Futures exchange.
The U.S. Energy Department's Energy Information Administration is scheduled to release its report on U.S. oil stocks for the week ended Aug. 29 later in the day. The petroleum supply report was expected to show that oil stocks rose by 500,000 barrels, according to the average of analysts' estimates in a survey by energy information provider Platts.
The Platts survey also showed that analysts projected gasoline inventories fell 1.8 million barrels and distillates went up 1.1 million barrels during last week.
"I expect the U.S. numbers to show oil demand is weakening," said Tetsu Emori, commodity markets fund manager at ASTMAZ Futures Co. in Tokyo. "The impact from Gustav will be seen in next week's numbers."
Energy output in the Gulf of Mexico began to slowly come back online after the passage of Hurricane Gustav. Some oil companies in the western Gulf whose equipment wasn't in the path of the storm began ramping up operations Wednesday.
However, about 96 percent of oil production in the Gulf and about 92 percent of natural gas output remained shut down on Wednesday, according to the U.S. Minerals Management Service, as energy firms assessed platforms, rigs and pipelines and worked to redeploy evacuated workers. The Gulf area is home to a quarter of U.S. oil production and 40 percent of refining capacity.
Crude has dropped about $38, or 26 percent, since surging to a record $147.27 a barrel on July 11, as a U.S. economic slowdown spreads overseas and curbs demand for petroleum products.
"Consuming countries like the U.S. and Japan are facing economic problems," Emori said. "I think we're heading toward $100 a barrel and if we break that, to between $88 and $95."
Gains by the euro and the British pound helped push oil prices higher, as investors bought into commodities as a hedge against inflation and dollar weakness.
The euro was up $1.4508 Thursday from $1.4488 late Wednesday in New York, while the pound bought $1.7820 compared to $1.7759 in the previous session. The dollar held fairly steady at 108.28 Japanese yen from 108.23 yen Wednesday.
In other Nymex trading, heating oil futures rose 1.81 cents to $3.0969 a gallon, while gasoline prices rose 2.96 cents to $2.7964 a gallon. Natural gas for October delivery gained 3.7 cents to $7.301 per 1,000 cubic feet.