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Oil prices rise to more than $84 a barrel

Oil prices rose above $84 a barrel today, though gains were tempered by signs of weak U.S. crude demand and an escalating European debt crisis.

By early afternoon in Europe, benchmark crude for June delivery was up 97 cents to $84.19 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 78 cents to settle at $83.22 on Wednesday.

Crude has fallen from above $87 a barrel earlier this month amid investor concern that a recovering U.S. economy isn’t boosting oil consumption.

Crude inventories increased by nearly 2 million barrels last week, more than analysts expected, according to the Energy Department’s Energy Information Administration’s weekly report. Supplies of gasoline and distillates used for diesel fuel and heating oil also continue to be well above average, according to the report.

“We view the market as shifting into a new and lower trading range,” Ritterbusch and Associates said in a report. “We look for this process to continue with the assistance of increasingly bearish oil supply-usage balances.”

Some analysts, however, continued to find the consistently high oil prices above $80 difficult to explain.

“The bottom line is that the symptoms keep changing, but the underlying source of strength is a boundless hope that economic recovery will give us higher demand,” said a report from U.S. energy consultancy Cameron Hanover. “It seems to be good enough for oil prices, even if it makes little sense to us.”

The deteriorating debt positions of some Southern European countries have also undermined investor optimism this week. Standard & Poor’s lowered its credit rating for Spain on Wednesday, a day after it slashed its ratings for Greece and Portugal.

Despite the uncertainty about Greece, the euro made gains on the U.S. dollar, rising to $1.3256 from $1.3187 late Wednesday in New York. A weaker dollar usually boosts oil prices at it makes crude cheaper and more attractive for investors holding other currencies.

In other Nymex trading in May contracts, heating oil rose 1.76 cent to $2.2466 a gallon, and gasoline gained 0.37 cent to $2.3364 a gallon. Natural gas advanced 0.15 cent to $4.363 per 1,000 cubic feet.

In London, Brent crude was up 86 cents at $87.02 on the ICE futures exchange.

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