* U.S. gasoline stockpiles unexpectedly drop -EIA
* For a short-term technical outlook on oil: []
* Euro zone economic sentiment improves
(Updates prices, adds graphic)
By Emma Farge
LONDON, April 29 (Reuters) - Oil rose above $84 on Thursday
on encouraging signs of buoyant U.S. fuel demand, shrugging off
credit rating downgrades for southern European countries.
Standard & Poor's on Wednesday cut Spain's rating one notch
a day after lowering Greece to junk status and downgrading
Portugal, raising concerns of spreading sovereign credit risk.
[]
But gasoline demand in the world's top oil consumer jumped
3.1 percent in the past four weeks from a year earlier, causing
an unexpected 1.2 million barrel drop last week. [] The
news raised expectations for demand growth during this summer
driving season which starts in May.
Euro zone economic sentiment in April was also better than
expected in a move that could also lift fuel consumption.
[]
"There's still a feeling that demand is robust and that the
broad outlook is good. It's been largely ignoring other
developments," said oil broker Christopher Bellew at Bache
Commodities, also highlighting strong growth in Asian countries
such as China.
U.S. crude for June delivery <CLc1> rose 96 cents to $84.18
a barrel by 1130 GMT, after climbing almost 1 percent on
Wednesday, boosted by rising stock markets. Earlier, prices rose
more than $1 to a high of $84.45 a barrel.
This week, U.S. crude prices have bounced off the 50-day
moving average at around $82.27 a barrel.
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For a technical chart on U.S. crude prices:
http://graphics.thomsonreuters.com/gfx/WT_20102904084607.jpg
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ICE Brent crude for June <LCOc1> rose $1 to $87.16, keeping
a near $3 premium to front-month U.S. crude after stockpiles at
the Cushing, Oklahoma, delivery point for West Texas
Intermediate crude climbed for a sixth consecutive week.
The market also drew support after the U.S. Federal Reserve
left interest rates near zero and gave an upbeat assessment of
the U.S. economy. []
Global equities <.MIWD00000PUS> rose on Thursday, pushing up
expectations for future demand.
MARKET DISTORTIONS
An oil glut in the U.S. Midwest is creating distortions in
oil futures markets.
The front-month WTI contract, which usually trades at a
premium to ICE Brent, this week has reached its biggest discount
against the European benchmark in eight months.
"In short, the overall crude inventory surplus is still
falling, but it has become entirely concentrated in just one
region of the country," said analysts at Barclays Capital.
The supply glut has also depressed the front month relative
to more distant futures contracts, resulting in a wider
contango. Total U.S. crude stockpiles rose by 1.9 million
barrels in the week to April 23, the Energy Information
Administration said on Wednesday, more than the forecast
1-million barrel increase.
Traders are closely watching currency markets which they
said are likely to steer oil prices going forward.
The euro rose slightly against the dollar on mounting
expectations for a Greek rescue package after falling to a
one-year low the previous day. []
While the firm euro was supportive on Thursday, some
analysts think that oil could weaken if it falls further against
the dollar. A stronger dollar tends to weigh on oil as it makes
it more expensive for buyers using other currencies.
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For a graphic showing the cost of U.S. crude in different
currencies, see here:
http://graphics.thomsonreuters.com/10/OIL_UCUR0410.jpg
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"We think commodity prices will be under pressure until such
time as the Euro zone authorities remove the nagging doubts
investors have about their ability to back the integrity of the
euro with the required financial muscle," said analyst Edward
Meir at MF Global.
(Additional reporting by Alejandro Barbajosa in Singapore;
Editing by James Jukwey)
