Crude-oil futures rose to a 12-week high Tuesday, rallying on positive market sentiment and concerns about short-term supply.
Light, sweet crude for September delivery rose $1.47, or 1.6%, to $93.67 a barrel on the New York Mercantile Exchange, the highest settlement price since May 15. Brent crude on ICE Futures Europe rose $2.45, or 2.2%, to settle at $112 a barrel.
"It's not just oil running up here," said Carl Larry, an analyst with Oil Outlooks & Opinions. "It's correlated directly to the confidence in the markets."
Better-than-expected earnings reports boosted stock markets Tuesday, with Standard & Poor's 500-stock index recently up 0.6% at 1403.15. Investors headed into riskier assets and out of the U.S. dollar, weighing the dollar down and making dollar-traded oil more affordable to foreign buyers.
Markets are also rising on anticipation of further stimulus measures from the Federal Reserve and European Central Bank, said Andy Lipow, president of Lipow Oil Associates, even though the central banks failed to announce new initiatives at their most recent meetings.
The U.S. government increased its estimates for the average prices of oil and oil products in 2012, according to a monthly report released at noon by the Energy Information Administration. The EIA also raised its forecast for global use of oil by 190,000 barrel a day from its estimate last month. The higher demand forecast "added further bullish fuel to this month's price rally," Jim Ritterbusch of Ritterbusch & Associates said in a note.
Traders are also eyeing supply concerns. Brent crude has seen continued tight supplies from the North Sea due to maintenance work, and a pipeline explosion Monday halted the flow of oil from Iraq to a key Turkish port.
In addition, Hurricane Ernesto is expected to reach the Bay of Campeche on Wednesday, potentially disrupting oil exports from Mexico.
Analysts are expecting that U.S. oil inventories fell by 500,000 barrels in the week ended Aug. 3, according to a Dow Jones Newswires survey. The inventory data, to be released at 10:30 a.m. EDT Wednesday, could be a "primary price catalyst" influencing oil futures, said Dominick Chirichella, oil analyst for Energy Management Institute, in a note to clients.
Meanwhile, front-month reformulated gasoline blendstock, or RBOB, rose above the $3 mark after a fire at one of the largest U.S. refineries in California. September RBOB settled up 6.91 cents, or 2.4%, at $2.9913 a gallon.
September heating oil rose 5.71 cents, or 1.9%, to $2.9980 a gallon.