Oil prices have held above $100 a barrel for more than a month, largely on the view that crude, gold and other hard commodities are effective hedges against a falling dollar and rising prices.
As the dollar has started to recover against the yen and euro, investors have been less prone to pour money into oil for reasons unrelated to supply and demand. Still, with long term prospects bleak for the U.S. currency, oil remains attractive as an investment.
Light, sweet crude for May delivery rose $1.46 to $105.29 a barrel in electronic trading on the New York Mercantile Exchange by afternoon in Europe. The Nymex crude contract settled $1 lower at $103.83 a barrel on Thursday.
Prices, analysts say, remain caught between those that want to buy oil as a hedge against another reversal in the dollar and those saying slowing economies worldwide will cut demand for fuel and energy.
On Wednesday, the front-month crude futures contract gained nearly $4 after a report showed a bigger-than-expected fall in U.S. gasoline inventories.
Since the report, gasoline prices have led the market. The drawdown in gasoline inventories completely overshadowed a massive 7.3 million barrels increase in crude oil stocks. Traders are also focusing on the low refinery utilization of 82.4 percent, which suggests further stock tightening for motor fuel just ahead of the Northern Hemisphere summer driving season.
But Wednesday's inventory report also showed U.S. gasoline demand remains weak despite ticking slightly higher.
At the same time, analyst Stephen Schork suggested pressure on heating oil supplies, noting that a recent cold snap in parts to the U.S. led to "nationwide aggregate heating demand in the Great Lakes (that) was nearly 20 percent above normal."
By afternoon, heating oil futures had risen by more than 2 cents to $2.9464 a gallon.
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