Singapore: Oil rebounded above $42 a barrel on Wednesday from a 9% fall a day ago, as worries over demand due to the faltering global economy eased.
Traders will watch for weekly US inventory data from the Energy Information Administration (EIA) due later today, after the American Petroleum Institute (API) reported a much smaller than expected crude stockbuild on Tuesday.
US crude rose 67 cents a barrel to $42.25 by 8:20am.
“It’s just an illiquid dead cat bounce,” said Jonathan Kornafel, Asia director of US-based options house Hudson Capital Energy.
Oil prices had plunged 9% on Tuesday on fresh indications that the world’s top energy consumer the United States was still deeply mired in recession.
Consumer confidence in the world’s top consumer fell to a record low in January, a survey showed, and US home prices plunged a record 18.2% in November from a year earlier, according to data from Standard & Poor’s.
Governments pledged billions of dollars on Tuesday to rescue their battered economies, with US Democratic President Barack Obama approaching opposition lawmakers to support his $825 billion stimulus proposal.
But Republicans in the US Congress insisted the plan should include bigger tax cuts and less spending.
The global economic crisis has weakened crude demand, especially in developed economies, and knocked prices off peaks of over $147 a barrel hit in July.
US crude stocks are expected to have risen for the fifth straight week last week by 2.9 million barrels, an expanded Reuters poll showed, much higher than the 800,000-barrel build the API reported on Tuesday.
The API has begun releasing its weekly inventory report on Tuesday afternoons, a day ahead of the official EIA report.
Supply cuts by the Organization of the Petroleum Exporting Countries (Opec) since second-half 2008 have given oil markets some support against the gloomy demand backdrop.
Kuwait said on Tuesday it would support a further output cut if needed, echoing comments by some other Opec members, while smallest member Ecuador said it would comply with the production cuts agreed by the cartel.
Opec next meets on 15 March to decide on output policy. Some analysts say current cuts may be insufficient to end the steep drop in prices.