Oil prices rose to near $75 a barrel Wednesday after a report showed U.S. crude inventories fell last week and a jump in housing sales suggested the world's biggest economy is picking up speed.
Gains were limited by a stronger dollar, which makes crude more expensive for investors holding other currencies.
By early afternoon in Europe, benchmark crude for February delivery was up 20 cents to $74.60 in electronic trading on the New York Mercantile Exchange.
The contract rose 68 cents to settle at $74.40 on Tuesday after the Organization of Petroleum Exporting Countries said the 12-nation cartel won't change production quotas, a move widely expected by investors. OPEC leaders called on group members to adhere more closely to current quotas and reduce cheating.
"For now, OPEC's satisfaction with $70-a-barrel oil is justified, but if demand does not show signs of a pickup and prices falter the focus will return to the issue of quota compliance," said analysts at KBC Market Services in Britain. "And this time leading countries that have cut oil production significantly might be less tolerant of those that have not."
Vienna's JBC Energy estimated spare capacity among OPEC members at around 6 million barrels a day next year, meaning that "cheating is all the more likely in 2010 and higher compliance might be difficult to achieve."
Prices were boosted by signs U.S. oil demand may be picking up. U.S. crude inventories fell more than expected last week, the American Petroleum Institute said late Tuesday. Crude stocks fell 3.7 million barrels while analysts had expected a drop of 2.0 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
The Energy Department's Energy Information Administration plans to announce its inventory report — the market benchmark — later Wednesday.
News that November home resales jumped 7.4 percent, above a forecast 2.5 percent, also supported the case for stronger crude demand in the U.S.
The dollar strengthened against other major currencies Wednesday, keeping a lid on oil prices. The euro bought $1.4254, unchanged from late Tuesday in New York, while the British pound slipped to $1.5947 from $1.5967 and the dollar was marginally higher against the Japanese currency, rising to 91.81 yen from 91.79 yen.
In other Nymex trading in January contracts, heating oil rose 0.74 cent to $1.9560 while gasoline gained 1.30 cents to $1.9018. Natural gas fell 2.7 cents to $5.688 per 1,000 cubic feet.
In London, Brent crude for February delivery rose 4 cents to $73.50 on the ICE Futures exchange.
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