NEW YORK (Dow Jones)--Oil futures advanced Thursday after the world's central banks moved to head off a credit crunch, simultaneously easing euro-zone woes and pushing down the dollar.
Light, sweet crude for October delivery settled up 49 cents, or 0.5%, to close at $89.40 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange settled up $2.94 or 2.6% at $115.34 a barrel.
The European Central Bank unveiled a plan where central banks in the U.S., Switzerland, Japan and the U.K. will help improve European banks' access to dollars. Fears of a European credit squeeze stemming from its sovereign debt crisis--and signs of global economic weakness--have weighed on oil demand and prices in recent months.
The ICE Dollar Index, which tracks the U.S. currency against a basket of other global currencies, fell 0.8 percent to 76.249. A weaker dollar also boosts crude prices by making the dollar-denominated commodity cheaper for holders of other currencies.
Prices rose despite a new spate of economic reports showing weak U.S. economic data, with unemployment claims up and consumer prices rising more than expected.
The central banks' move "helped buoy, for now, prospects about the economy going forward," said John Kilduff, founding partner of Again Capital. "There was starting to be a real sense of decline here in the air," he said, "now the euro is on a rally, commodities, stocks are up, everything came back into focus here."
Market observers take differing views whether the rally in oil prices--which have bounced back from an 11-month intraday low of $75 a barrel in August--will continue. Traders note intraday lows have been improving, and prices recently hit a new one-month high. Some add oil could break away from its current $90 range and jump toward the mid-$90s. Still, others say prices will remain choppy as long as market uncertainty rules.
"The bigger problem still remains that there's this fundamental weakness in the European Union that's going to drag it down," said Carl Larry, the director of research and derivatives at Blue Ocean Brokerage.
October reformulated gasoline blendstock, or RBOB, settled up 57 cents, or 2%, at $2.7828 a gallon. October heating oil settled up 80 cents at $3.0246 a gallon.