By Myra P. Saefong and Michael Kitchen, MarketWatch
SAN FRANCISCO (MarketWatch) ? Oil futures climbed Thursday, poised for their highest settlement level of the month as strength in the euro in the wake of policy decisions by the Bank of England and European Central Bank fed a decline in the U.S. dollar.
Oil prices also saw support as investors took inspiration from a broader risk-on sentiment with rising U.S. and European equities and positive economic data, while natural-gas futures rallied on the back of a bigger-than-expected drop in last week?s U.S. supplies.
Crude oil for April /quotes/zigman/2291772 CLJ3 +1.17% ?gained 95 cents, or 1.1%, to $91.38 a barrel on the New York Mercantile Exchange, climbing back from Wednesday?s 39-cent loss. Prices haven?t closed above $91 since Feb. 28.
Rival benchmark Brent crude lost ground, however, with the April contract /quotes/zigman/2735833 UK:LCOJ3 +0.02% ?up 17 cents, or 0.2%, to $111.23 a barrel on ICE Futures, with its smaller gains helping to narrow its price spread with Nymex West Texas Intermediate crude.
?Central banks are directing sentiment thus far,? said Matt Smith, commodity analyst at Schneider Electric in Louisville, Ky.
ECB President Mario Draghi?Both the Bank of England and the European Central Bank have left interest rates unchanged,? he said in a note. ?Post-meeting rhetoric out of the ECB President [Mario] Draghi is rallying the euro like a mad thing, and hence encouraging WTI [crude] higher.?
As expected, the ECB kept rates unchanged at 0.75% and the BOE stood pat at 0.5%, making no changes to its quantitative-easing program. See: ECB policy unchanged.
In a news conference, Draghi played down the threat to euro-zone stability posed by Italy?s inconclusive election results. That, in turn, helped boost the view for energy demand in the region. See: Draghi plays down implications of Italy election.
The euro?s advance following the central-bank decisions also weighed on the dollar, making dollar-denominated crude cheaper for holders of other currencies.
The ICE dollar index /quotes/zigman/1652083 DXY -0.56% ?traded at 82.164, down from 82.490 late Wednesday in North America. See: Dollar slips on day of central bank action.
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Oil rallied along with equities Thursday. The Dow Jones Industrial Average /quotes/zigman/627449 DJIA +0.30% ?headed higher after closing at a fresh record a day earlier in the wake of an encouraging report on growth in private payrolls. See: Stocks gain as Dow extends record rise.
Oil prices fell Wednesday, however, after the U.S. Energy Information Administration reported that crude supplies rose last week by more than three times what analysts had expected. See: Oil falls on supply, recoups $90 after Beige Book.
On Nymex Thursday, petroleum-product futures were mixed with April heating oil /quotes/zigman/2202761 HOJ3 +0.03% ?flat at $2.98 a gallon and April gasoline /quotes/zigman/2078006 RBJ3 -0.13% ?down 1 cent, or 0.4%, at $3.11 a gallon.
The death of Venezuelan President Hugo Ch?vez on Tuesday, meanwhile, has had little direct impact on the oil market, though some analysts say that in the long term, the nation?s oil market may benefit from a change in government. See Commodities Corner: Post-Chavez Venezuela: oil?s next Saudi Arabia?
Natural gas rally
Natural-gas futures rallied after the EIA reported on Thursday a drop in U.S. supplies that was bigger than the market expected.
April natural gas /quotes/zigman/2294266 NGJ13 +3.26% ?jumped 10 cents, or 3%, to trade at $3.57 per million British thermal units.
Supplies fell 146 billion cubic feet for the week ended March 1, the EIA said. Analysts polled by Platts forecast a decline between 130 billion cubic feet and 134 billion cubic feet. See: Natural-gas prices rally after U.S. supplies drop.
The big supply drop ?confirms that we indeed are having a real winter, and not just in a few spots,? said Richard Hastings, macro strategist at Global Hunter Securities.
The market is still well ahead of the supply drawdowns seen during the same period two years ago, and ?indicative of a robust winter across a large geography,? he said, noting that last year?s numbers aren?t a good comparison given its mild winter.
/quotes/zigman/2291772
US : U.S.: Nymex
Volume: 200,963
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/quotes/zigman/2735833 UK : U.K. ICE Futures Europe
Volume: 201,187
March 7, 2013 8:04p
/quotes/zigman/1652083 US : U.S.: ICE Futures U.S.
Volume: 0.00
March 7, 2013 3:05p
/quotes/zigman/627449 US : DJ-Index
Volume: 61.41M
March 7, 2013 3:15p
/quotes/zigman/2202761 US : U.S.: Nymex
Volume: 43,926
March 7, 2013 3:04p
/quotes/zigman/2078006 US : U.S.: Nymex
Volume: 40,177
March 7, 2013 3:05p
/quotes/zigman/2294266 US : U.S.: Nymex
Volume: 180,077
March 7, 2013 3:05p
Myra Saefong is a MarketWatch reporter based in San Francisco. Follow her on Twitter @MktwSaefong. Michael Kitchen is Asia editor for MarketWatch and is based in Los Angeles. You can follow him on Twitter at @KitchenNews. Sara Sjolin in London contributed to this report.
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