COLUMBUS, Ohio – Oil prices posted solid gains Wednesday, rebounding from a 17-month low as a rally in global stock markets backs the view of some oil traders who think that crude prices may have bottomed out.
The Energy Information Administration's weekly report showed that inventories rose 500,000 barrels last week, a million fewer barrels than was expected by analysts surveyed by energy information provider Platts. Gasoline inventories decreased 1.5 million barrels last week, a surprise to analysts who predicted a build of 900,000 barrels.
Light, sweet crude for December delivery rose $5.56 to $68.29 a barrel on the New York Mercantile Exchange. The contract settled at $62.73 Tuesday, the lowest closing price since May 2007.
Oil prices have fallen by 55 percent since peaking at $147 a barrel in mid-July.
Oil investors have been tracking equity indexes for signs of market sentiment. They took heart from a rally in stocks that began Tuesday in the U.S. and continued in Asia and Europe on Wednesday.
But oil trader and analyst Stephen Schork did not read much into Wednesday's rally.
He credited the rise in oil prices on the dollar weakening against the euro in anticipation of a half-point rate cut Wednesday afternoon by the Federal Reserve and an oversold market for crude.
Investors often buy commodities such as crude oil as an inflation hedge when the dollar weakens and sell those investments when the greenback rises.
"Anyone who thinks a bottom is in, I'll sell them all the oil they want," Schork said.
Motorists, meanwhile, are continuing to get a break at the gas pump.
Retail prices fell 4 cents overnight to $2.589 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. That is about 30 cents lower than prices were a year ago.
In other Nymex trading, gasoline futures rose 6 cents to $1.51 a gallon, while heating oil gained more than 7 cents to fetch $1.98 a gallon. Natural gas for November delivery increased by 24 cents to $6.43 per 1,000 cubic feet.
In London, December Brent crude rose $3.59 to $63.88 a barrel on the ICE Futures exchange.
Japan's benchmark Nikkei index jumped 7.7 percent on Wednesday while Australia's key stock index rose 1.3 percent. The Dow Jones industrials were flat Wednesday heading up to the Fed announcement, a day after a stunning 889-point gain Tuesday. The 10.88 percent jump was the Dow's second-largest point gain, coming after the 936 points the Dow jumped on Oct. 13.
Part of the reason for oil's collapse is declining consumption.
Demand for gasoline over the four weeks ended Oct. 24 was 3.4 percent lower than a year earlier, averaging 8.9 million barrels a day, the Energy Department said.
At the same time, U.S. refineries ran at 85.3 percent of total capacity on average, a gain of 0.5 percentage point from the prior week. Analysts expected capacity to rise 0.3 percentage point to 85.1 percent.