Oil prices climbed above $74 a barrel on Wednesday, as crude followed the stock market higher on encouraging earnings news.
Drivers got another break at the pump. The national average for a gallon of unleaded regular slipped to $2.721, down 0.3 cent from Tuesday, according to AAA, Wright Express and Oil Price Information Service. That's 3.4 cents lower than a week ago and 11.7 cents higher than a year ago.
Benchmark crude rose $2.09 to settle at $74.07 a barrel on the New York Mercantile Exchange.
In recent months oil prices have been influenced by the stock market as an indicator of economic recovery and potential demand for oil and gas. The Dow Jones Industrial Average was up about 200 points, or 2 percent, in afternoon trading. The NASDAQ and S&P 500 were each up more than 2 percent. Financial stocks improved as State Street Corp. issued a profit forecast that was better than analysts expected.
Crude also got a boost from a forecast of lower inventories when the Energy Department's Energy Information Administration issues its weekly report on Thursday. Analysts expect crude supplies to shrink by 3.5 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
Even with a decline, the U.S. and the world are awash in oil and the question of demand weighs heavily on pricing. Some analysts are concerned that growth in developed nations will slow in the second half and next year as massive government stimulus programs taper off.
"Following a robust increase in oil demand in the past year, the stimulus-driven rebound is giving way to slower growth," Bank of America Merrill Lynch said in a report. "Oil inventories look high as demand is set to soften."
The intense heat wave gripping the eastern U.S. has not had much effect on the price of natural gas, used by some power plants to generate electricity. That could change with forecasts of sustained heat and an active hurricane season this summer.
"We see reasons to expect prices to strengthen over the next two months," energy consultancy Cameron Hanover said in a note to investors. "Hurricanes and heat are what natural gas bull markets thrive upon, and this year has several elements suggesting that hurricanes and heat will be common."
Natural gas lost 11.7 cents to close at $4.565 per 1,000 cubic feet on the Nymex.
In other trading heating oil rose 6.15 cents to close at $1.9787 a gallon, and gasoline gained 5.40 cents to close at $2.0253 a gallon.
Brent crude added $2.06 to settle at $73.51 a barrel on the ICE futures exchange.
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