Oil prices moved up slightly closer to $91 a barrel on Thursday as reports of a moderately improving U.S. economy, which suggests increased fuel consumption, outweighed a big rise in crude supplies.
By early afternoon in Europe, benchmark oil for April delivery was up 37 cents to $90.80 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 39 cents to close at $90.43 per barrel on the Nymex on Wednesday.
A report from the U.S. Federal Reserve issued Wednesday showed the country's economy strengthened across much of the country. The Fed's Beige Book report showed that auto sales, more hiring and the ongoing housing recovery helped the U.S. economy grow in the first two months of the year.
Also Wednesday, the U.S. Energy Information Administration said in its weekly report that U.S. oil supplies grew last week by 3.8 million barrels, or 0.4 percent, more than three times the increase that analysts expected. The nation's supply of crude is at its highest level in over 30 years and 10.3 percent above year-ago levels. And at more than 7 million barrels a day, U.S. oil production is at the highest level since the late 1990s.
Oil prices were also lagging behind recent advances on equity markets, such as the record high closes achieved twice this week by the Dow Jones industrial average.
"The positive correlation between commodity prices and equities that has been observed in the past does not apply at present," said a report from Commerzbank in Frankfurt. "Oil prices have quickly shed the gains they achieved following news of the death of Venezuelan President Chavez. Clearly, disappointed investors are currently switching from commodities to equities and thereby reinforcing this trend."
While oil prices rose moderately in the hours immediately following the death on Tuesday of President Hugo Chavez of Venezuela, markets are awaiting to see whether the next government will try to attract more foreign investment into the country's oil sector and try to boost output.
Venezuela has the world's second-largest oil reserves, but production — and oil exports to the United States — dropped sharply under Chavez.
"Over the longer term, changes in policy toward the energy sector might eventually allow Venezuela's oil production to return to the much higher levels seen in the late 1990s," Julian Jessop of Capital Economics wrote in an email commentary.
Some support for crude came from a weaker dollar, which makes oil cheaper and a more enticing investment for traders using other currencies. On Thursday, the euro was up $1.3015 from $1.2974 late Wednesday in New York.
Brent crude, used to price many kinds of oil imported by U.S. refineries, was down 48 cents at $110.58 a barrel on the ICE Futures exchange in London.
In other energy futures trading on the Nymex:
— Wholesale gasoline dropped 1.47 cents to $3.11 a gallon.
— Heating oil fell 0.87 cent to $2.9669 a gallon.
— Natural gas lost 0.5 cent to $3.465 per 1,000 cubic feet.
Pamela Sampson in Bangkok contributed to this report.