Oil hovers near $72 as US crude inventories plunge

Oil prices hovered near $72 a barrel Friday in Asia as a drop in U.S. crude inventories suggested demand may be picking up.

Benchmark crude for October delivery was down 9 cents at $71.85 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. On Thursday, the contract rose 63 cents to settle at $71.94.

Crude has traded between $65 and $75 for a few months as investors struggle to gauge the strength of the global economic recovery. Evidence of a sustained rebound in crude consumption would likely trigger a break out of that price range.

The Energy Information Administration said Thursday that crude inventories fell by 5.9 million barrels last week, more than three times estimates of analysts surveyed by Platt's, the energy information arm of McGraw-Hill Cos.

Oil has jumped $4 this week as investors eyed rising stock markets and a slumping U.S. dollar.

The Dow Jones industrial average rose 0.8 percent Thursday for its fifth day of gains. Meanwhile, the euro rose Friday in Asian trading to $1.4598 from $1.4574 the day before and the dollar dropped to 90.97 yen from 91.77 yen.

The Organization of Petroleum Exporting Countries, which decided to leave output levels unchanged at a meeting Thursday in Vienna, said it was cautious about the outlook for an economic recovery.

"There remains great concern about the magnitude and pace of this recovery," said OPEC, which pumps about 40 percent of the world's oil production

In other Nymex trading, gasoline for October delivery rose 0.64 cent to $1.81 a gallon, and heating oil was steady at $1.79 a gallon. Natural gas fell 2.0 cents to $3.24 per 1,000 cubic feet.

In London, Brent crude was up 5 cents to $69.91.