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World oil prices jumped Thursday on the back of a weaker dollar and positive European data.

New York's main contract, light sweet crude for delivery in September, climbed 1.37 dollars to 78.36 dollars a barrel, its first gain in five sessions.

London's Brent North Sea crude for September gained 1.53 dollars to 77.59 dollars per barrel.

Analysts said the weaker dollar spurred some buying because oil is traded in the US currency, making the commodity cheaper for holders of stronger units.

The euro soared past the 1.31-dollar mark Thursday, its best showing since early May, on reports of strengthening eurozone confidence and an improvement in Germany's employment picture.

The euro also drew support from news of an unexpected fall in first-time claims for US jobless benefits, a report that emboldened investors to seek out currencies such as the euro seen as riskier than the dollar.

"Oil is responding to an increase in risk appetite broadly," said analyst Bart Melek of BMO Capital Markets.

"After the stress test on European banks showed that they're not in such bad shape as some had believed, we saw a gradual lifting of fear from the market," he said. "The demand side in oil is looking fairly decent."

New claims for US unemployment benefits fell unexpectedly last week to 457,000, down 2.4 percent from the previous week, the Labor Department said Thursday.

Jobless claims fell by 11,000 in the week ending July 24, down substantially from the 464,000 level expected by analysts.

"This was against our expectations for a gain," said Andrew Gledhill of Moody's Economy.com . "We had expected recent troubles with seasonality related to fewer (auto) factory retooling shutdowns to bring more volatility."

On Wednesday, oil prices dropped sharply after the US Department of Energy said crude oil inventories jumped 7.3 million barrels last week in the United States, indicating sluggish demand in the world's biggest economy.

That was the strongest weekly increase since October 2008 and confounded market expectations for a drop of 1.4 million barrels.

Gasoline (petrol) stocks rose 100,000 barrels, below analyst expectations for a build of 500,000 barrels, and distillates, which includes heating oil and diesel, rose by 900,000 barrels, while analysts projected a 2.1-million-barrel gain.

The data came on top of growing evidence of weak US consumer confidence which has sapped hopes for a strong economic recovery.

Story from AFP
AFP 07/29/2010 21:38

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Oil prices jump on weak dollar, positive European data