Perth: Oil reversed the previous session’s losses and rose above $60 a barrel on Tuesday, thanks to improved sentiment amid a stock market rally, but lingering fears of the deep and long recession capped oil’s gains.
US crude for August delivery rose 38 cents to $60.07 a barrel by 0236 GMT. The contract finished down 20 cents at $59.69 on Monday, after briefly touching its lowest level in almost two months.
London Brent crude rose 36 cents to $61.05.
“Investors are still nervous about going into the commodities markets in a big way. One day of gains on the equities markets isn’t going to be enough for investors to change their sentiments entirely,” said Ben Westmore, a commodities analyst at the National Bank of Australia.
“Market players are still trying to reassess how long this recovery is going to take and it will probably need a good week of gains on the stock markets before their appetite for commodities investment increases.”
Asian stocks rallied on Tuesday, tracking gains on Wall Street as bullish analyst comment on the US financial sector lifted hopes that banks’ quarterly results may be stronger than expected.
Expectations that US crude stocks fell last week also lent some support to oil prices.
Oil’s recent losses, which have partially reversed the 40% spike of last quarter, come amid growing macroeconomic pessimism as a slew of economic data released across the globe has shown that an economic recovery would probably be patchy, if it comes at all, later this year.
Analysts said uncertainties over plans by US regulators to rein in excessive speculation in energy and commodity markets were also chipping away at investors’ appetite.
“Such moves have served to instil a fear factor among commodity market participants, resulting in a sharp reduction in net long positions in the crude oil market,” Barclays Capital said in a Monday report.
In Nigeria, the country’s main militant group widened its offensive against Africa’s biggest oil producer on Monday despite the release of its suspected leader, raising concern there might be further attacks.
Key economic data expected on Tuesday include US business inventories for May, US producer prices and retail sales data for June as well as the API weekly oil report.