Singapore: Oil rebounded more than $2 a barrel on Tuesday, recouping some of the previous session’s $6 loss, after Australia’s interest rate cut sparked guarded optimism global central banks may act to stem the credit crisis and its fallout on oil demand.
Australia’s central bank cut its benchmark cash rate by the largest magnitude since December 1994. That shifted investors’ focus to other central banks, from Europe to Japan, for their answers to a US call for a “forceful and coordinated” reaction to kickstart anaemic bank lending.
US light crude for November delivery was $2.40 higher at $90.21 a barrel, the first rise in five trading days.
That came after it fell to an eight-month low of $87.56 a barrel on Monday, the first time below $90 since early February.
London Brent crude rose $1.87 to $85.55 a barrel.
“This is just a modest recovery after the sell-off of previous sessions. People are still very worried about the outlook for the international economy,” said David Moore, a commodities analyst at Commonwealth Bank of Australia.
A crisis that began with the overheated US property market and the $11 trillion US mortgage market was still rocking confidence worldwide, with Sweden, Austria and Denmark following Germany’s lead by offering blanket deposit guarantees to depositors.
Iceland meanwhile gave regulators sweeping powers to oversee a faltering banking system as its currency fell 30%.
In the United States, more steps to shore up banks and ease pressure on the credit markets could be coming, following the $700 billion bailout bill last week.
Oil prices have tumbled from a peak above $147 a barrel in July as high fuel prices and the fallout from the financial crisis slow oil demand in top consumer the United States and other industrialised countries.
Oil demand in China, which helped fuel a 6-year rally in commodities, will be key. Analysts are watching for signs the crisis is hitting consumption there.
China will skip gasoline imports in October for a second successive month due to heavy domestic stockpiles and a dip in demand, traders said.
And members of producer group Opec worried about the drop in the price of oil to around $90 a barrel, Iraq’s oil minister told Reuters in an interview.
News that Mexico’s state-owned oil company Pemex was evacuating four offshore oil platforms due to tropical storm Marco could become supportive for prices.