Crude Prices Rise as Stocks Take a Beating

Reuters

Brent crude rose more than 2 percent Wednesday as data showed U.S. crude stockpiles fell unexpectedly last week.

Even with the gains, crude stayed near six-month lows, however, after a series of big losses in recent days on worry over European debt problems and the potential for recession in the United States.

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Brent crude rose $2.26 to $104.83, but was still down on the week after tumbling nearly 10 percent last week.

U.S. light crude gained $1.89 at $81.19.

U.S. government data showed U.S. crude stocks fell by 5.23 million barrels last week, confounding forecasts for a build in stocks. Crude stored at the NYMEX Cushing, Oklahoma, hub fell 1.37 million barrels, its lowest level since November.

``The report gave the market a bit of a pop but I don't know if oil can shake off the way the dollar and equity markets are reacting,'' said Gene McGillian, analyst at Tradition Energy in Stamford, Connecticut.

Wall Street stocks fell sharply, erasing most of the previous day's gains, on fears of trouble in the French banking sector, which has significant exposure to shaky European debt.

Oil trading volumes were robust, with Brent already above the 30-day average and both Brent and U.S. volumes approaching half a million lots traded before noon in New York.

At midday Wednesday, implied volatility for U.S. crude stood at 61.81 percent on the Chicago Board Options Exchange's Oil Volatility Index, unchanged from Tuesday's settlement, but still at two-year record highs. The index has been erratic throughout the day, trading with an upward bias in a wide range that has eclipsed Tuesday's strong range.

The high for the index was 70.37 percent, achieved at 9:31 AM EDT as the U.S. equities markets opened under Rule 48 provisions in anticipation of sharply lower stock prices. Since that higher open, the index has traded closer to Tuesday's settlement.