Growing signs of a strengthening US economy boosted Dow Jones to a record closing high
Brent futures rose towards $112 a barrel on Wednesday, tracking the surge in equity markets and expectations of a revival in demand growth following positive data from the United States and China, two of the world's top oil consumers.
Growing signs of a strengthening US economy and continued support from the Federal Reserve boosted the Dow Jones industrial average to a record closing high on Tuesday. For oil, support also came from China's pledge to keep growing at 7.5 percent, countering worries over the expansion of the world's second-biggest economy, and North Sea supply disruptions.
Brent crude gained 29 cents to $111.90 a barrel by 0430 GMT, after settling $1.52 higher and snapping a five-day losing streak, the longest since early December. US oil gained 22 cents to $91.04.
"Commodity prices are catching up," said Tetsu Emori, a commodities fund manager at Astmax Investments in Tokyo. "China's statement on GDP growth is very positive for oil demand, and recent data suggests the growth outlook in the United States is good. These should support prices."
The encouraging economic outlook may push Brent to at least $120 a barrel and US oil to $100 by summer, Emori said.
Wall Street's record close encouraged investors to take more risk, boosting Asian shares, base metals and other commodity-linked currencies, while the US dollar eased 0.14 percent against a basket of currencies.
The surge in US equities was driven, in part, by data showing the US services sector accelerated to its fastest pace in a year in February, helped by a rise in new orders and demand for exports, an industry report showed.
Markets were now awaiting US nonfarm payrolls data due this week for further clues on the health of the economy.
The oil market is also watching developments in Venezuela, following the death of President Hugo Chavez after a two-year battle with cancer. Investors are on the look out for a succession plan in the OPEC nation. The country's oil industry was operating normally and no disruption was expected, state oil company PDVSA said.
"His death is not likely to have any major impact on the oil market," Emori said. "But investors are waiting and watching."
Yet gains were capped by medium-term concerns such as rising US crude supply and the country's fiscal crisis, which have pushed Brent down about $8 a barrel since a high of $119.17 touched in mid-February.
Weekly US inventory data released by the American Petroleum Institute after the settlement showed a steep build of 5.6 million barrels in domestic crude stockpiles for the week to March 1, including a 259,000-barrel build at the Cushing, Oklahoma, delivery point for the US oil contract.
Product stockpiles fell slightly more than analysts' expectations, however. Traders will now be watching for weekly stockpile data from the US Energy Information Administration, due out on Wednesday, for further insight into inventories.