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Crude Oil Price: $99.65 at 3:33 PM

Crude Gains, Pulled Higher By Equities

Crude futures ended higher Thursday, bouncing back from midday losses as stock markets rallied and U.S. oil stockpiles posted modest increases.

Nymex light, sweet crude for February delivery settled 29 cents higher, or 0.3%, at $99.65 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures exchange traded 55 cents higher at $107.96 a barrel.

After a midday dip into negative territory, oil prices were pulled along by a rally in equities, which rose on data showing improvement in the U.S. housing and employment sectors.

The Dow Jones Industrial Average, which has served as a guidepost for the oil market in recent months as crude traders eye economic sentiment, was recently 108 points higher at 12261.

The increase in the stock market was coupled with weekly U.S. oil inventory data from the Department of Energy. The agency said Thursday that U.S. oil inventories rose by 3.9 million barrels in the week ended Dec. 23.

While the results were above analysts’ average estimate, Peter Donovan, a vice president and broker at Vantage Trading in New York, said the report inspired some relief buying after the American Petroleum Institute, an industry group, released its own data Wednesday showing a much larger 9.6 million-barrel build.

“The Energy Department build was just so much less than the API number,” Donovan said.

Still, the report also showed a drop in implied demand for fuel products, suggested that the massive 10.6 million stockpile decline in the week-earlier report was a one-time event linked to year-end shuffling of inventory by refineries.

Stockpiles of distillates, which include heating oil and diesel, increased by 1.2 million barrels. Gasoline stockpiles fell by 700,000 barrels after analysts had expected a 500,000-barrel drop.

Futures have hung near the $100 a barrel mark for most of December. Improving economic data in the U.S., the world’s largest oil consumer, has created expectations of rising demand. But weakness in Europe continues to drag down crude and other commodities as investors worry about the consequences of the region’s debt crisis.

“In Europe there are still a lot of worries,” said Phil Flynn, an analyst at PFGBest. He added that price moves could be exaggerated this week due to light volumes.

Meanwhile, statements from the U.S. and Iran regarding the Strait of Hormuz have raised tensions in the oil-producing region and helped put a floor under prices.

The U.S. Navy force stationed in the Persian Gulf maintained normal interaction with its Iranian counterpart as Tehran conducts war games in the Gulf. On Wednesday, the U.S. military warned against any attempt by Iran to close the strait, which handles roughly 15 million barrels of oil a day.

“Any attempt to close the strait will not be tolerated,” George Little, the Pentagon press secretary, said. “The strait is an economic lifeline for countries in the Gulf, including Iran.”

The statement came in response to earlier threats by Iran to shut the channel if the West pressed ahead with sanctions over the nation’s nuclear program.

“If our enemies in the West start conspiring against us, we’ll take strong action to put them in their place,” said First Vice President Mohammad Reza Rahimi in a speech to Iranian students Tuesday.

Front-month January reformulated gasoline blendstock, or RBOB, settled 2.88 cents, or 1.1%, higher at $2.6801 a gallon. January heating oil settled 2.41 cents higher at $2.9175 a gallon.

Crude Oil Price: $98.67 at 3:33 PM

Crude Prices Flirt with $100 a Barrel

Crude futures rallied Thursday and flirted with $100 a barrel, rising with equities on improved U.S. economic data and continued momentum from a report Wednesday showing a tightening oil-supply picture.

Light, sweet crude for February delivery ended the day up 86 cents, or 0.9 percent, at $99.53 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures Europe exchange was up 12 cents, or 0.1 percent, at $107.83 a barrel. Volume was about one-third of normal levels because of the holiday week.

Futures prices touched the $100-a-barrel threshold twice during the day, for the first time since last week. Oil traders chose to look past weaker economic data, with third-quarter U.S. economic growth revised downward. Traders and analysts said the market appeared primed to drive higher, ignoring what would ordinarily be caution signals.

“Wall Street wants to end this happy, happy year with oil above the psychologically important $100 level, and who’s to argue with the best and brightest the Ivy League has to offer?” said Stephen Schork, analyst and editor of The Schork Report. “It’s like fighting city hall. You can’t fight it.”

The Labor Department said initial jobless claims fell unexpectedly last week, decreasing 4,000 to 364,000 in the week ended Dec. 17, reaching the lowest level since April 2008. The Conference Board’s index of leading economic indicators advanced for the seventh-straight month, and the Thomson Reuters/University of Michigan consumer-sentiment index rose.

Still, the Commerce Department said the U.S. economy expanded at an annualized rate of 1.8 percent during the third quarter, lower than its previous estimate and the analyst consensus of 2 percent.

Stocks rose, with the Dow Jones Industrial Average recently up 62 points to 12169. Oil often trades in tandem with equities. Analysts said the crude market was getting a continued boost from Wednesday’s U.S. Energy Information Administration report showing weekly oil inventories dropped 10.6 million barrels to 324 million barrels, the largest drop in more than a decade and a three-year low.

Oil’s gain “was kind of surprising, given the U.S. GDP number and everything else going on, unless it’s just a further knock-on effect from what we saw yesterday from inventories,” said Jason Schenker, president of Prestige Economics in Austin, Texas. “Market participants still continue to be ignoring the international problems and threats which are looming larger and larger every day, whereas they’re focusing on tepid improvements in the U.S. economy.”

Front-month January reformulated gasoline blendstock, or RBOB, ended up 1.99 cents higher at $2.6398 a gallon. January heating oil settled down 0.11 cent to $2.9076 a gallon.