Oil rises over two percent

Oil prices rose more than 2 percent on Tuesday on optimism that Greece can pass an unpopular austerity program as Europe fashions a solution to Athens' debt woes and also on lift from a weak dollar. The weak dollar boosted oil and other dollar-denominated commodities as the euro rallied on optimism about Greece's ability to avoid default. The 19-commodity Reuters-Jefferies CRB index rose by 1.7 percent and headed for its biggest gain in six weeks.
"Despite the violence in Greece, there is the hope that the austerity plan will be passed. So, that puts Greece on the back burner for now," said Phil Flynn, analyst at PFGBest Research in Chicago. ICE Brent crude for August rose $2.79 to settle at $108.78 a barrel, pushing back above its 150-day moving average and trading as high as $109.05. US August crude rose $2.28, or 2.5 percent, to settle at $92.89 a barrel, the biggest one-day percentage gain since May 18 and closing above front-month crude's 200-day moving average of $92.81.
Brent's premium to US light sweet crude stayed on the rebound, pushing intraday above $17 a barrel after briefly slipping below $13 on Monday. US gasoline and heating oil futures also posted strong gains ahead of front-month July contract expirations on Thursday.
Gasoline futures rose nearly 3 percent even though US retail gasoline demand fell last week, reversing three weeks of gains despite falling prices, according to a weekly report from MasterCard. Brent trading volumes were above the 30-day average, outpacing US crude volumes.
Greek lawmakers will vote Wednesday and Thursday on a package of spending cuts, tax increases and privatisation required as a price for further financial aid. Anti-austerity protests turned violent in Athens on Tuesday as the European Union warned Greek lawmakers the country faces immediate default unless they back austerity. Hopes for solving Greece's debt crisis got a boost from news that German banks have agreed in principle to use a French proposal as a basis for negotiating private-sector participation in a Greek debt rollover. France offered a radical solution Monday for banks to roll over some Greek debt for 30 years.
US stocks rose on the optimism about Greece, with data showing a moderation in the pace of home price declines in the United States also lending support. Oil got additional lift from news that a low-pressure system over the oil-rich Bay of Campeche off Mexico's coast had a 70 percent chance of developing into a tropical depression during the next 48 hours.
Oil was rebounding from a price slide last week after the International Energy Agency announced plans to release 60 million barrels of oil from strategic reserves. As part of the co-ordinated release, South Korea will start to release 3.46 million barrels of oil by "today at the earliest," an economy ministry source said. US oil inventories will be in the spotlight late on Tuesday, when industry group the American Petroleum Institute releases its weekly report. Forecasters expected that crude stocks fell last week, while distillate and gasoline stockpiles gained, according to a Reuters survey of analysts.