Oil rose above $77 on Thursday, after surging more than 3 percent the previous day, lifted by a deeper-than-forecast drop in crude and fuel stocks in the world's top energy consumer and as the dollar paused. The dollar's recent rally stalled on news of a surprise drop in US home sales that damped optimism about the economy, holding the currency below a three-month high against the euro and two-month high on the yen.
US crude for February delivery rose 73 cents at $77.40 a barrel by 0704 GMT, the highest since December 4, after settling up $2.27 on Wednesday. The contract has gained about $7 since December 14, when it hit a near 2-month low. London Brent crude gained 67 cents to $76.12. "But the EIA data were much more positive than the market had expected, so many factors are now quite bullish," he said. "I think the market is heading towards the upside, probably will hold the level by the end of the year."
US commercial crude oil stockpiles fell 4.9 million barrels to 327.5 million barrels last week, inventory data from the Energy Information Administration (EIA) showed, far exceeding the 900,000-barrel drop forecast by analysts. Lower imports into the United States and year-end drawdowns in crude stocks for tax purposes were the main reasons for the decline, analysts said. Distillate stocks fell a larger-than-expected 3.1 million barrels, while gasoline showed a surprise drop of 900,000 barrels.