Oil prices jump on dollar weakness, short covering

Oil prices rallied on Thursday, with both North Sea Brent and US crude oil rising sharply, away from near six-year lows as the dollar weakened and investors bought back into futures markets to cover previous short sales.

The front-month Brent futures contract was due to expire later on Thursday, and traders said investors who had sold at higher levels in recent days and weeks were now buying back to take profit after recent heavy price falls.

Oil and other commodities are priced in dollars and tend to gain when the US currency falls.

The dollar also fell against a basket of major currencies on Thursday, providing extra support for commodities.

The Swiss National Bank abandoned a three-year-old cap against the euro on Thursday, pushing the Swiss currency up sharply and depressing the euro and the dollar.

Brent crude was up $1.50 cents a barrel at $50.19 a barrel by 1340 GMT, at a discount to US crude, trading at $50.48 a barrel, up $2.00. The discount for North Sea crude oil reflected a very weak seaborne spot oil market, traders said.

"Today's jump has been very fast and appears to be mostly related to short-covering of futures contracts," said an analyst at a major European oil company.

Both crude oil benchmarks hit their lowest levels for almost six years earlier this week on a global oversupply of high quality oil.