Singapore :  Oil yesterday rose to over $76 (Dh279), boosted by a rally in Asian equities as investors focused on the prospects for accelerating Chinese demand for natural resources.

US September crude climbed 19 cents to $75.61 a barrel at 0822 GMT, having earlier risen as high as $76.08. ICE Brent rose 35 cents to $76.82.

Shares in Hong Kong and Shanghai rose yesterday with resources outperforming the broader market as optimism about Chinese demand grew and news of mega-mergers whetted appetite in the sector.

"You are seeing money coming back into resource stocks and generally that is a sign that people are getting more optimistic about demand from China," said Howard Gorges, a director at South China Securities.

Hostile takeover

Commodity-related plays are finding favour after a hostile takeover deal involving BHP Billiton, the world's largest miner, and Canada's Potash Corp that could run into tens of billions of dollars, traders said.

Oil prices have this week shown signs of stabilising above $75, a level that most traders and analysts say is representative of the current fundamental balance. That is also close to the mid-point of this year's $64.24-$87.15 trading range, as demand growth has been insufficient to drain ample supplies.

The US benchmark touched a six-week low at $73.83 on Wednesday, after the Department of Energy said total US petroleum stockpiles last week soared to a 20-year high on a weekly basis. Prices then tracked Wall Street higher on an upbeat forecast from US retailer Target.

The dollar strengthened yesterday by 0.33 per cent against a basket of currencies, capping gains in oil prices triggered partly by the highest settlement in China's key stock index in more than three months.

Prices might take their next cue from Thursday's weekly US jobless claims report, seeking evidence that the economic recovery is continuing apace.

Initial claims for jobless benefits for the week ended August 14 are expected to have fallen to 476,000 from 484,000 the week previous, according to the median of forecasts from analysts polled by Reuters. While still alarmingly high, a reduction in the level of claims would at least be a hopeful step that high U.S. unemployment may be in retreat.

For most of this year, oil prices have hovered around the sweet spot for the Organisation of Petroleum Exporting Countries (Opec) in the $70-$80 range, after the group relaxed compliance with 2008 production cuts as demand rebounded.

US commercial crude and product inventories rose last week to the highest level since the US government began tracking weekly data in 1990, statistics published on Wednesday showed, a sign fuel supply is outpacing demand amid a slow US economic recovery.

In aggregate, total commercial crude and product stocks rose to 1.130 billion barrels in the week to August 13, according to a weekly report from the Energy Information Administration, above the previous weekly record high of 1.127 billion barrels set in September 1990.

Before EIA began breaking out weekly stocks data, it measured monthly inventory levels, which once totalled as high as 1.36 billion barrels in August 1980.

The rise in total commercial stocks came even as domestic crude stocks fell 818,000 barrels and gasoline by 39,000 barrels. Distillate stocks rose 1.1 million barrels, their 12th consecutive weekly increase.