Oil rises to above $89 amid global stock rally (Updated)

SINGAPORE (AP): Oil prices rose to above $89 a barrel Thursday in Asia as a global stock market rally boosted crude trader optimism that the U.S. may avoid a recession.

Benchmark oil for October delivery was up 32 cents to $89.13 at midday Singapore time in electronic trading on the New York Mercantile Exchange. Crude fell 9 cents to settle at $88.81 on Wednesday.

In London, Brent crude for October delivery was up 25 cent at $115.10 on the ICE Futures exchange.

Crude has risen 17 percent from August 9 amid a growing consensus that the U.S. economy will see weak growth, but not contract, in the second half.

Oil traders often look to equities as a barometer of overall investor sentiment, and the Dow Jones industrial average has risen four consecutive days.

Asian stock markets gained Thursday after China said manufacturing increased in August. HSBC's purchasing managers' index rose for the first time in three months while a survey by an industry group also showed activity expanded slightly.

"Despite the weak signs of recovery here in the U.S., oil supply remains tight globally," energy traders and consultant Blue Ocean Brokerage said in a report.

Some analysts are concerned a struggling U.S. economy will undermine crude demand.

Crude supplies increased by 5.3 million barrels last week, the Energy Department's Energy Information Administration said in its weekly report.

Analysts expected oil supplies to decline by 1.2 million barrels, according to Platts, the energy information arm of McGraw-Hill Cos.

"A continued highly vulnerable macroeconomic environment still leaves open the possibility of a sharp and fast price plunge capable of negating the recent price upswing in matter of a couple of sessions," Ritterbusch and Associates said in a report.

In other Nymex trading for October contracts, heating oil added 0.1 cent to $3.09 per gallon and gasoline futures was steady at $2.88 per gallon. Natural gas for October delivery gained 1.8 cents to $4.07 per 1,000 cubic feet.

EARLIER REPORT

Oil price lower, natural gas rises

NEW YORK (AP) - The price of natural gas, a major energy source for power plants, jumped nearly 4 percent Wednesday as power started to come back in the U.S. East following widespread outages caused by Hurricane Irene.

In other energy trading, benchmark West Texas Intermediate crude fell 9 cents to finish at $88.81 per barrel in New York, and Brent crude, used to price international varieties of oil, rose 83 cents to end at $114.85 in London.

Utilities in the U.S. are making progress in reconnecting homes and businesses that lost power over the weekend. More than three-quarters of the 9.4 million outages were restored during the past few days, and almost all the power should be back by next week. The recovery will boost energy demand along the East Coast, increasing the output from natural gas-fired generators.

Natural gas rose 14.5 cents, or 3.7 percent, to finish at $4.054 per 1,000 cubic feet.

Gas also got a boost Wednesday from the shutdown of a major pipeline in the Gulf of Mexico that has operating problems. The 255-mile (410-kilometer) long Destin Pipeline transports gas from offshore wells in the Gulf to processing facilities in Mississippi that send gas on to major interstate pipelines.

BP, which is the majority owner of Destin, said that the pipeline can transport up to 1.2 billion cubic feet of natural gas per day, about one-fifth the amount that Americans consume. The company didn't say how long the pipeline would be offline.

Losing the Destin Pipeline should not make a big impact on supplies, said Ron Denhardt, vice president of natural gas services at Strategic Energy & Economic Research. "But it's still going to support prices for a little while," he said.

In other energy trading on the New York Mercantile Exchange, heating oil was up less than a penny to finish at $3.084 per gallon and gasoline futures increased 3.48 cents to end the day at $2.8763 per gallon.