NEW YORK (Reuters) - Oil prices rallied sharply on Thursday after two days of losses as news of deeper industry spending cuts and a sinking U.S. dollar revived buying.
U.S. crude closed above $51 (38 pounds) a barrel, shaking off a morning dip tied to data showing a potentially record rise in stockpiles at the Cushing, Oklahoma, delivery hub.
Its discount versus Brent crude expanded to around $6.84 a barrel intraday, the widest in five months, as U.S. oil tanks swelled.
French energy major Total on Thursday became the latest to announce investment and job cuts following a near-halving of oil prices since June. The chief executive of Shell warned that supply might not be able to keep up with growing demand as companies slash budgets.
“Shell’s CEO had a more bullish take on supply and demand and the weaker dollar also helped support crude,” said Phil Flynn, analyst at Price Futures Group in Chicago.
Expiring March Brent futures rose $2.39, or 4.37 percent to settle at $57.05 a barrel following a 3 percent loss on Wednesday.
Gains were fuelled in part by the weaker U.S. dollar, with the dollar index falling nearly 1 percent after reports showing U.S. retail sales fell 0.8 percent last month and weekly jobless claims rose above 300,000.
U.S. March crude futures rose $2.37 or 4.85 percent to settle at $51.21. Trading volume across the curve topped 1 million contracts for the ninth consecutive day, a third higher than the January average as bulls and bears battle over direction.
Traders remain split over whether the market has found a floor after rebounding from a post-2009 low near $45 a month ago. Many see the market currently oversupplied by up to 2 million barrels per day.
Volatility has jumped to its highest since the financial crisis, jolting traders who had been adjusting to a period of predictable declines. The oil VIX index dipped to 58 on Thursday, down from a six-year high above 63.
The latest jolt came at mid-morning on Thursday after oil intelligence firm Genscape reported that crude oil inventories in Cushing, Oklahoma, rose by more than 3 million barrels in the four days to Feb. 10, suggesting government data next week may show the biggest ever weekly build.
U.S. March ultra-low sulphur diesel futures rallied 9.96 cents, or 5.49 percent, to settle at $1.9137 a gallon, following government data on Wednesday that showed East Coast stocks fell 2.4 million barrels last week as cold weather spurs demand.
Additional reporting by Himanshu Ojha and David Sheppard in London and Adam Rose in Beijing; Editing by Dale Hudson, Ruth Pitchford, Bernadette Baum and Chris Reese