LONDON: Oil rose above $78 a barrel on Wednesday after Tuesday’s strong US corporate earnings raised optimism over the strength of economic recovery in the world’s largest economy.
US crude for September, the front-month contract after Tuesday’s expiry of August, rose 53 cents to $78.11 a barrel, before dipping to $77.83 at 0950 GMT.
London ICE Brent futures gained 34 cents to $76.56.
The optimism that started on Wall Street on Tuesday spread to European and Asian equities on Wednesday.
Sentiment was helped by strong earnings from Apple and speculation that Fed Reserve Chairman Ben Bernanke may suggest steps to spur lending in testimony to US lawmakers later on Wednesday.
Investors should have a clearer picture of how well US businesses are recovering following the economic meltdown, from a flurry of companies reporting second-quarter results later on Wednesday, including financial services group Wells Fargo <WFC.N> and investment bank Morgan Stanley.
However, industry data released late on Tuesday showed crude stocks in the United States fell by a smaller-than-expected 241,000 barrels in the week to July 16.
"I think the data was relatively neutral with a very small decline in crude stocks," said Christophe Barret, oil analyst at Credit Agricole.
"The corporate earnings in the US and equities are having a short-term supportive impact on oil prices," Barret added.
Closely watched US crude and product inventory government data from the Energy Information Administration is due on Wednesday at 1430 GMT.
The US National Hurricane Center raised the likelihood that a tropical depression or storm would form over Puerto Rico and Hispaniola in the next two days to 70 percent from 60 percent late on Tuesday.
The storm could eventually reach the oil-rich Gulf of Mexico. If this hit production, it would likely support an oil price rally.
"This (tropical storm) could have a big impact in the coming days and it will be closely watched, but we’ll have to wait and see," Barret said.
The Center has forecast this year’s Atlantic storm season may be the most intense since 2005, when hurricanes Katrina and Rita nearly paralyzed US oil output and refining along the Gulf coast.
BP Plc rejected a Times of London report on Wednesday that Chief Executive Tony Hayward was to step down within the next 10 weeks.
—Additional reporting by Alejandro Barbajosa
