NEW YORK – Oil prices rose more than $1 a barrel Thursday, a day after the government reported more robust refinery usage for the first time in weeks — a sign that refiners have begun to ramp up production ahead of the summer driving season.
Traders also appeared to interpret a decision by the U.S. Federal Reserve to leave its benchmark interest rate unchanged as positive for the market.
A barrel of light, sweet crude for May delivery jumped $1.59 to $61.20 on the New York Mercantile Exchange. It rose as high as $61.49 earlier in the session.
The Brent crude contract for May rose $1.47 to $62.24 on the ICE Futures exchange in London.
The government's inventory report released Wednesday indicated that refineries are beginning to emerge from their seasonal maintenance period, after weeks of declining utilization, and will soon start demanding more crude oil. The Energy Information Administration reported refineries operated at 86.3 percent capacity last week, up 0.7 percent from the prior week.
"Now that utilization has hit, the anticipation is that refineries are going to be out there aggressively looking for crude to refine," said analyst Peter Beutel at Cameron Hanover.
The EIA reported a larger-than-expected, 3.4 million-barrel decline in gasoline inventories for the week ended March 16.
Nymex gasoline futures rose less than a penny to $1.942 a gallon.
The market's rally was also fueled by the Fed's move late Wednesday to hold its key interest rate steady. The central bank appeared to move its bias farther away from a future rate hike, said Standard & Poor's Chief Economist David Wyss.
"The fact that the Fed is not going to tighten is good for the oil market," Wyss said. "The oil market has been concerned that the Fed might cause a recession by tightening too much, given that the Chinese are trying to slow down their economy."
The U.S. and China together accounted for 46 percent of world economic growth last year, he added. Strong economic growth translates into increasing demand for crude oil.
Oil prices continue to supported by strong demand for oil products in the U.S. and Asia, said energy analyst Victor Shum, of Purvin & Gertz in Singapore.
"Demand for oil products remains good. Even though the recent turmoil in the global equities market raised some concern about the state of the U.S. and Chinese economy, none of that really has shown in oil demand," he said.
A plunge on Wall Street and in Asian markets last week stirred concerns about the U.S. economy's health and future demand for energy. The markets have since bounced back.
On Thursday, the EIA reported a small increase in U.S. natural gas inventories. For the week ended March 16, gas stocks grew by 17 billion cubic feet to about 1.53 trillion cubic feet, or about 19 percent above the five-year average for this time.
Natural gas futures gained 2.3 cents to $7.183 a gallon. Heating oil futures for April rose about 4 cents to $1.709 a gallon.