Oil futures finished higher Thursday as equities rallied, despite a closely watched report from an energy watchdog saying that the crude-oil market is amply supplied.
Light, sweet crude for May delivery settled 94 cents, or 0.9%, higher at $103.64 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange settled $1.53, or 1.3%, higher at $121.71 a barrel.
The International Energy Agency said production from the Organization of Petroleum Exporting Countries ran ahead of demand during the first quarter, while Saudi Arabia and China stockpiled oil. Oil stocks rose by as much as 1.2 million barrels a day during the first three months of the year, the IEA said.
"The cycle of repeatedly tightening fundamentals evident since 2009 has been broken for now," the IEA said in its monthly analysis of global energy markets. The IEA represents the world's developed energy-consuming countries.
The IEA's report suggests that the increasingly stringent sanctions imposed by Western countries on Iran aren't choking off oil supplies as feared. Sanctions have reduced Iranian production by close to 10%, the IEA said.
The stand-off between Iran and the West over Tehran's nuclear program has been a major factor in this year's oil-market rally. The rising tensions have led to tightening sanctions and heightened worries about a possible blockade in the Strait of Hormuz or a military confrontation. Either outcome would likely send oil prices rising sharply, analysts say.
But tensions have cooled in recent weeks, as both sides show increasing willingness to pursue diplomacy. This weekend, Iran is set to meet with major global powers in Istanbul to discuss its nuclear program.
Oil prices have also given back much of their recent gains. Nymex crude has fallen more than 5% from its recent high near $110 a barrel reached in late February.
Prices have also been weighed by a weakening jobs picture in the U.S., the world's largest oil consumer. The Labor Department said Thursday the number of U.S. workers applying for jobless benefits rose 13,000 last week to a seasonally adjusted 380,000--the biggest weekly rise in claims in nearly a year.
Traders, however, looked past the bearish cues on Thursday, as oil prices followed broader markets higher. The Standard & Poor's 500 Index was recently up 1.4% to 1387, rising as New York Fed President William Dudley said interest rates will likely remain low.
Prices were also buoyed by a weaker dollar, with the ICE Dollar Index off 0.6% to 79.289. A weaker dollar typically boosts crude prices by making the dollar-denominated commodity cheaper for holders of other currencies.
"We're not up today based on a physical shortage. We're up today because the S&P 500 is up and a lot of other commodities are up," said Tim Evans, energy analyst at Citi Futures Perspective in New York. "It's a risk-on trade flow."
Front-month May reformulated gasoline blendstock, or RBOB, settled 6.12 cents, or 1.9%, higher at $3.3567 a gallon. May heating oil settled 5.14 cents, or 1.7%, to $3.1663 a gallon.