Crude settles higher as stock market resumes rise, European debt concerns fade

NEW YORK, N.Y. - Oil prices followed stocks higher Wednesday as worries about European debt problems eased and buyers returned to the market.

Benchmark crude for October delivery rose 58 cents to settle at US$74.67 a barrel on the New York Mercantile Exchange.

Shares of oil and gas companies climbed after Fitch raised its rating on BP. The troubled energy giant issued a report Wednesday taking blame for the big spill in the Gulf of Mexico, while saying other companies involved in the Deepwater Horizon disaster shared some of the responsibility. BP shares rose $1.18, or 3.2 per cent, to close at US$38.37.

The AMEX Oil Index, which tracks a dozen major oil and gas companies, gained 1.4 per cent. The Dow Jones Industrial Average closed up more than 46 points while the S&P 500 and the Nasdaq ended higher as well.

Oil traders often look to stocks as a barometer of overall investor sentiment.

Worries about the European economy that brought down stocks on Tuesday faded. "A successful bond auction in Portugal ... lessened concerns over eurozone sovereign debt," Addison Armstrong, senior director of market research at Tradition Energy, said in a note to investors.

Still, concerns about record high levels of oil inventories continue to undermine significant gains in energy prices.

"There is a consensus emerging that economic growth is not going to be strong enough to eat into the existing surpluses," energy consultants Cameron Hanover said.

"We have had too many negative economic data points released over the last few weeks for us to build a convincing argument that the economy is recovering strongly."

The Energy Department's weekly report on crude oil inventories comes out a day later this week, on Thursday, because of the Labour Day holiday. Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., expect oil supplies to fall by 730,000 barrels and gasoline to drop by 820,000 barrels.

The U.S. government also releases natural gas inventories on Thursday. Analysts expect them to expand by 56 billion to 60 billion cubic feet.

In other Nymex trading in October contracts, heating oil rose 0.74 cent to settle at US$2.0817 a U.S. gallon (3.78 litres) and gasoline gained 0.65 cent to settle at US$1.9394 a gallon or about 51.3 cents US a litre. Natural gas for October delivery fell 3.8 cents to settle at US$3.814 per 1,000 cubic feet.

In London, Brent crude rose 43 cents to settle at US$78.17 on the ICE Futures exchange.

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Associated Press writers Pablo Gorondi in Hungary and Alex Kennedy in Singapore contributed to this report.

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