By Jack Farchy

Published: May 27 2010 11:07 | Last updated: May 27 2010 11:07

Oil prices rose on Thursday morning and US crude traded higher than European oil for the first time in more than a month as a weaker dollar and hopes of recovering demand supported the market.

Nymex West Texas Intermediate, the US benchmark, traditionally trades at a premium to ICE Brent. But in the past month that relationship has inverted as record crude oil inventories in the US Midwest – and crucially at Cushing, Oklahoma, the delivery point for the WTI contract – depressed prices for the US benchmark.

On Thursday July WTI gained $1.50 to $73.01 a barrel, while July Brent was up $1.06 at $72.80. That is a 21 cent premium for WTI over Brent, its first since April 12, and a reversal of the distortion that saw Brent trade as much as $6.57 higher than US crude.

The US Department of Energy on Wednesday reported a larger-than-expected increase in inventories across the US, but stocks at Cushing were down 300,000 barrels at 37.6m barrels. Inventories of some oil products were also slightly lower, suggesting increased demand.

Edward Morse, head of commodities research at Credit Suisse in New York, said the data were “essentially neutral” and that the price move was a response to perceptions of the broader macroeconomic and political situation.

However, he added: “If the recent growth in crude oil imports ... is a reflection of a curtailment of floating storage, then these numbers should come down soon and with crude oil runs expected to continue to rise through June, the onset of a crude draw should occur in a matter of weeks.”

Tom Pawlicki, analyst at MF Global, said he expected prices to rise in June as fundamental supply and demand factors took effect: “There have yet to be reported any signs of slowdown in Chinese energy demand, while US demand has improved markedly,” he said.

Elsewhere in commodity markets, base metals ticked up, with copper for delivery in three months up 0.9 per cent at $6,885 a tonne on the London Metal Exchange. Spot gold was just 0.1 per cent higher at $1,210.75 a troy ounce.

source: http://www.ft.com/cms/s/0/4741dff0-6970-11df-8ae3-00144feab49a.html