Oil prices rose by almost two per cent on Thursday due to an industry report that showed a drop in U.S. crude inventories and as robust economic indicators injected confidence into financial markets.

U.S. crude prices for July rose 1.15 dollars to 74.01 dollars a barrel , taking gains for the week to almost four dollars a barrel.

ICE Brent rose 99 cents to 74.74 dollars a barrel by the same time.

The American Petroleum Institute (API) reported late on Wednesday U.S. crude stockpiles fell by more-than-expected last week, dropping by 1.4 million barrels versus market expectations of just a 100,000 barrel fall.

Oil traders awaited confirmation of the decline from government statistics due later on Thursday.

Optimism from surprisingly strong U.S. housing data and double-digit auto sales growth also extended into Thursday, boosting equities in Asia and Europe and pressuring the U.S. dollar.

“We’ve seen oil prices taking their cues to a large degree from equity market movements,” said Toby Hassall, chief commodities analyst at CWA Global Markets Pty Ltd.

“If this spike in risk aversion is reversing, you might expect the U.S. dollar to give up some recent gains.

“That improvement in risk appetite might feed into oil prices, and the typical seasonal decline in stockpiles in the U.S. would also be supportive,” he said.

In addition to the crude stocks decline, the API said gasoline stocks in the United States fell by 962,000 barrels last week, compared with forecasts for a 500,000 barrel decline.

Stocks of distillates, which include diesel and heating oil, rose by 852,000 barrels, above expectations for a 100,000 rise.

Concern about a slowdown in China’s economy weighed on oil prices earlier this week, hitting sentiment already battered by Europe’s debt crisis.

But U.S. pending home sales in April rose more than expected to a six-month high, the third consecutive month of gains, fuelling optimism that an economic recovery is gaining steam in the world’s top economy.

“Crude demand will ease slightly ahead of the seasonal pick-up in the second half of this year, but we remain confident it will still grow strongly in 2010,” VTB Capital analyst Andrey Kryuchenkov said.