UPDATE 9-Brent crude up slightly; gasoline falls nearly 4 cents
(Updates with settlement prices, adds comments)
July 25 (Reuters) - Oil prices inched higher in quiet trade on Thursday with help from a slightly weaker dollar, while gasoline futures dropped nearly 4 cents per gallon, dragged down by a rapid plunge in the cost of ethanol credits.
The U.S. dollar fell across the board, undercut by positive economic reports from the euro zone. A survey by influential German think-tank Ifo showed European business morale was better than expected, which pushed the European common currency to a one-month peak against the dollar of $1.32 per euro.
The dollar's modest falls helped support Brent and U.S. oil prices, according to Phil Flynn, an analyst at Price Futures Group in Chicago. A weaker dollar generally supports dollar-denominated commodities.
Brent crude rose 46 cents to settle at $107.65 a barrel, off lows of $106.40 a barrel. U.S. crude climbed 10 cents to settle at $105.49 a barrel. The European benchmark's premium to West Texas Intermediate was wider than last week, holding around $2.23.
RBOB gasoline futures traded down 3.7 cents to settle at $3.0170 per gallon.
In contrast to the quiet day in oil trading, gasoline futures were volatile on Thursday. The price of the RBOB contract fell sharply following a plunge in the cost of ethanol credits, only to partially recover later in the day.
Ethanol credits, which must be purchased by gasoline blenders to comply with U.S. renewable fuels standards, traded below $1 per gallon in early U.S. activity, sharply down from last week's record levels of $1.50.
Traders said that the run up in the credits, also known as Renewable Identification Numbers (RINs), had helped drive U.S. RBOB gasoline futures to four-month highs over $3.16 per gallon late last week. Refiners have said that the rise in the cost of the credits, which traded at 5 cents during late 2012, has pushed up gasoline prices.
The drop in RIN costs added to the selling pressure on gasoline, which fell as much as 7 cents on Thursday in a rapid sell-off that started around 9:35 a.m. EDT (1345 GMT), reaching intra-day lows of $2.9775 per gallon.
The sell-off had eased by 10:30 a.m., after the price of RBOB futures came within a quarter of a cent of the contract's 20-day moving average, a closely watched technical indicator. By noon, prices were squarely back around $3 per gallon.
(Additional reporting by Matthew Robinson, Sabina Zawadzki, Robert Gibbons, Cezary Podkul, and David Sheppard in New Yorkm, Peg Mackey in London, NS Florence Tan in Singapore; Editing by William Hardy and Chris Reese)