Oil up 87 cents after surging more than a dollar, driven by third consecutive decline in U.S. inventories.
LONDON (Reuters) -- Crude oil surged more than $1 to $77 on Thursday, its highest level in almost a year, on increasing demand from refiners in the world's top consumer.
The rally lifted U.S. crude above London Brent for the first time since February, restoring its traditional premium. Analysts and investors pointed to U.S. data released Wednesday that showed crude stocks fell for a third consecutive week.
"With imports staying around the current 10.4 million barrels per day and refinery runs expected to increase 150,000 to 250,000 bpd over the next two weeks, potentially larger draws for crude may be on the horizon," Lehman Brothers analysts said.
At 6:47 am ET, crude was up 87 cents at $76.76 a barrel, off a session peak of $77.24, the highest since Aug. 9, 2006. It had surged $2.32 on Wednesday.
London Brent crude was up 52 cents to $76.84. That put the North Sea grade at a discount to U.S. oil for the first time since late February.
"It's a return to normality," said Rob Laughlin at Man Financial, adding that U.S. oil's discount to Brent had been caused in part by refinery problems in the U.S. and he expected the U.S. crude to continue commanding a premium.
"The draw that we saw in some of the crude stocks are demonstrating that the refining position in the states is probably the best it has been for about three months in terms of the operating capacity."
While bullish for gasoline and heating oil, the closure could be bearish for crude if the plant stops processing for a prolonged period.
Barclays Capital technical analysts, who study charts to determine future price direction, said $76.40 was a key level for U.S. oil, the high of the September contract.
"We are keeping a close eye on the $76.40, WTI high, as a close above would confirm a resumption of the larger uptrend, increasing the odds that prices will test the July 2006, all-time highs at 78.40," they said.