Oil: Prices end higher as wheat and lumber soar

Crude oil prices closed higher on Thursday as concerns about tight crude supplies in the United States resurfaced.

In other featured commodity trade, wheat prices jumped on export hopes and supply worries. Lumber soared on surprising strength in US housing construction, and gold also edged up.

At the New York Commodity Exchange, crude oil for August delivery closed 36 cents higher at US$31.41 a barrel. Earlier, Brent crude in London closed 26 cents higher at US$28.62.

"After Wednesday's big sell-off, technical traders still see no break in the up-trend line," said Phil Flynn, energy market analyst at Alaron Trading in Chicago. "People have resumed watching the weather, with a new storm brewing."

Tropical Storm Danny, the fourth named storm of the hurricane season, formed in the Atlantic east of Bermuda late on Wednesday, but was a threat only to shipping interests, the National Hurricane Center said.

The last storm, Hurricane Claudette, did minor damage to Gulf of Mexico oil facilities earlier this week.

Crude oil prices fell sharply on Wednesday as weekly US government data showed an unexpected rise in supplies of petrol and heating oil with refiners ramping up production.

US crude oil stocks were lower, however. They remain 11 per cent lower than a year ago and analysts said any sudden supply disruptions could send prices higher. Stocks are just 10 million barrels above minimum refinery operating levels.

"There is no leeway in the system," said analyst Clay Smith at Commerzbank. "People are concerned about the trend that has persisted for the last 12 months of falling inventories."

Oil supplies in the United States tightened last autumn and worsened over the winter due to disruptions in shipments from Venezuela and Iraq.

NYMEX August heating oil rose 0.77 cent a gallon to 79.68 cents while August petrol edged up 0.05 cent to 89.07 cents.

At the Chicago Board of Trade, ideal crop conditions in the US Midwest continued to weigh on corn and soybean prices, improving prospects for bumper harvests by the day and lifting farmer sentiments after last year's drought.

September corn closed 3/4 cent lower at US$2.07-1/4 a bushel, setting life-of-contract lows for a fifth straight day. August soybeans closed 9-1/4 cents a bushel lower at US$5.72-3/4.

But the star of the day was wheat, which jumped to the highest level in a month on booming exports and concerns about world supplies. September wheat rose 6-3/4 cents at US$3.27-1/2.

"We're seeing super export numbers at levels we haven't seen for a while, and we continue to hear commentaries about the crop conditions not being all that impressive in Europe," said Jerry Gidel, analyst for North America Risk Management.

The government on Thursday said US wheat export sales in the week ended July 10 rose to 659,400 metric tons, at the high end of trader estimates and up 18 per cent from the prior week.

France, Ukraine and Russia have all reported problems with their wheat crops, and Australia has been hit by drought again.

At the Chicago Mercantile Exchange, lumber surged the daily allowable trading limit on a bullish US housing starts report, firm cash market and NAFTA ruling against Canada.

September lumber closed up the US$10 daily limit at US$288.20 per thousand board feet.

The US Commerce Department reported June housing starts rose a surprising 3.7 per cent to an annualized 1.803 million units. Wall Street analysts had expected 1.750 million.

Permits for single-family homes were at the highest level since the Commerce Department began tracking them in 1960.

A North American Free Trade Agreement panel also ruled in favor of US anti-dumping duties on Canada softwood imports.

At the COMEX in New York, gold scratched out a slight gain after early slippage caused by a stronger US dollar, which erodes gold buying from Europe and Asia. COMEX