* Euro zone economic sentiment improves
* U.S. gasoline stockpiles unexpectedly drop -EIA
* For a short-term technical outlook on oil: []
(Updates prices, adds U.S. stocks)
By Emma Farge
LONDON, April 29 (Reuters) - Oil rose above $85 on Thursday
on encouraging signs of buoyant U.S. fuel demand and hopes for a
rescue package to help Greece service its debts.
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 the market is now hopeful that an aid package can be
swiftly implemented to prevent contagion after German Chancellor
Angela Merkel threw her weight behind a deal, analysts said.
Euro zone economic sentiment in April was better than
expected in a move that could also lift fuel consumption going
forward. []
U.S. crude for June delivery <CLc1> rose $1.88 to $85.10 a
barrel by 1403 GMT, after climbing almost 1 percent on
Wednesday, boosted by rising stock markets. Prices extended
early gains to hit a high of $85.15 a barrel after U.S. stocks
opened higher. []
ICE Brent crude for June <LCOc1> rose $1.28 to $87.44, by
the same time keeping a near $3 premium to front-month U.S.
crude.
"The oil complex is being fuelled by a little less worry
over the situation in Greece as both the EU leadership
(including Germany) and the IMF accelerate talks to get the
bailout package in place," said Dominick Chirichella of Energy
Market Analysis, adding that the stronger euro was also
supportive for oil.
The euro bounced from a one-year low against the dollar the
previous day, making dollar-denominated oil cheaper for buyers
of other currencies. []
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
For a graphic showing the cost of U.S. crude in different
currencies, see here:
http://graphics.thomsonreuters.com/10/OIL_UCUR0410.jpg
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Oil extended gains on Thursday after U.S. jobless claims
fell by 11,000 last week, although this was less than initially
expected. []
DEMAND OUTLOOK
Fuel demand is improving in the world's top consumer the
United States where gasoline demand 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 the
summer driving season which starts in May.
"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, highlighting strong growth in Asian countries such
as China.
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. []
This week, U.S. crude prices have bounced off the 50-day
moving average at around $82.27 a barrel. But WTI is still
depressed relative to Brent as an oil glut in the U.S. Midwest
weighs.
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.
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.
(Additional reporting by Alejandro Barbajosa in Singapore and
Janet McGurty in New York; editing by James Jukwey)
