LONDON (Reuters) – Oil prices hovered around $72.50 a barrel on Thursday after rising more than 5 percent this week as swollen U.S. distillate stocks such as diesel offset positive sentiment in other markets.
U.S. crude was little changed on New York's Wednesday close at $72.58 a barrel by 0947 GMT (5:47 a.m. EDT), after starting the week below $70 a barrel.
London Brent Futures fell were down 11 cents at $71.56 a barrel.
European equity markets rallied in early trade and the FTSEurofirst 300 held above the 1,000 mark, while gold touched new 18-month highs, adding to signs that investors are ready to take on more risk.
But analysts said that weak fundamentals neutralized this potentially bullish news as traders eyed brimming distillate stocks which could limit any price gains during the peak demand heating season.
U.S. Energy Information Administration data showed distillates rose by 2.2 million barrels last week, far exceeding analyst expectations for a 1.3 million barrel build.
And while crude stocks fell by more than expected last week, analysts said this was because of higher refinery utilization rates rather than a genuine pick-up in demand.
"We see no current physical tightness or even an imminent shift to a supply/demand deficit to help push the market higher," said Citi analyst Timothy Evans in a research note, adding, "Some of the barrels have simply been moved downstream."
Gasoline stocks rose by 500,000 barrels in the same period.
Weakness in the dollar helped support oil prices on Thursday as it hit a new 2009 low against the Euro on Thursday as investors shifted money to riskier assets such as equities.
Oil prices tend to rise when the dollar falls because a weak dollar can make it cheaper to buy oil and other dollar-denominated commodities.
"We should remember that there is a big loss of confidence in the dollar and that will lend some support to oil," said Tony Nunan, risk manager at Mitsubishi Corp in Tokyo.
Oil has moved in tandem with equity markets this year and these have helped tow prices up from around $32 a barrel last December.
Analysts will be eyeing U.S. jobs data which is set to be released at 1230 GMT (8:30 a.m. EDT)for clues that the economy is really recovering in the world's number one energy consumer.
