Oil prices hit a seven-month high on Thursday after U.S. data showed a drop in jobless claims, boosting expectations of an economic recovery that could revive ailing energy demand.
U.S. crude for July delivery rose $2.69 to settle at $68.81 a barrel after peaking at $69.60 earlier in the day -- the highest level since early November. London Brent gained $2.83 to $68.71.
There is a hell of a lot of momentum in these markets right now, said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.
U.S. investment bank Goldman Sachs said a potential economic rebound alongside production cuts by the OPEC cartel could propel crude to $85 a barrel by the end of the year and to $95 a barrel by the end of 2010.
Oil's gains Thursday came after a U.S. report showing the number of U.S. workers filing new claims for jobless benefits fell for a third straight week, indicating some loss of force in the pace of the job market's deterioration.
The data contributed to a rally on Wall Street of about 1 percent. <.N>
As has been the case lately, constructive economic data has been used as an indicator that the economy will improve and that oil demand will follow, said Peter Beutel, president of trading consultants Cameron Hanover in New Canaan, Connecticut.
Some analysts cautioned, however, that a staggering rebound in oil prices from lows near $30 a barrel this winter might be overdone given continued soft demand and high stockpiles.
Oil had closed more than $2 a barrel lower on Wednesday, after the U.S. Energy Information Administration reported U.S. crude inventories rose 2.9 million barrels.
Inventories of crude oil have swelled since the start of the economic crisis last autumn as global energy demand dipped for the first time in a quarter century.
Aside from brimming onshore storage levels, some 100 million barrels of crude oil have been stowed away on vessels at sea, French oil major Total's
Experts have said high oil inventories at sea could quickly flood the market once profits from holding onto the crude fall below the cost of storage.
Concerns over weak demand and rising inventories have led producer group OPEC to agree to 4.2 million barrels per day worth of crude oil output cuts since September.
Saudi Oil Minister Ali al-Naimi has said OPEC would wait until crude inventories fall to around 53 days of forward cover -- nearly 10 days below current levels -- before considering raising output again. (Additional reporting by Rebekah Kebede, Robert Gibbons, Gene Ramos and Matthew Robinson in New York and Joe Brock in London; Editing by Lisa Shumaker)