London: Oil rebounded more than $1 to above $111 a barrel on Wednesday, after falling for two sessions, supported by a surprise drop in US gasoline inventories and a weaker dollar.
US gasoline stocks fell 676,000 barrels last week, the American Petroleum Institute said on Tuesday ahead of government supply data in the Energy Information Administration report due at 8:00pm.
“We’re waiting for the data from the US, the market wants to bounce a bit and if it’s strong it will give the market a lift, but if it comes in weak, then it will just confirm what everyone thinks, so there won’t be too much downside,” Helen Henton, analyst at Standard Chartered said.
Brent crude was up $1.21 a barrel at $111.20 by 2:46pm. US crude gained $1.49 to $98.40, rebounding from a 12-week settlement low of $96.91 on Tuesday.
The API report also showed U.S. crude stocks rose 2.7 million barrels last week and supplies of distillates dropped 2.8 million barrels. A Reuters survey had forecast US crude inventories would be up for the fourth straight week, but only by 1 million barrels. The poll had also forecast an 800,000 barrels rise in gasoline stocks.
The drop in gasoline stocks could signal that demand for the motor fuel picked up, allaying trader concern about weaker demand ahead of the peak summer driving season.
The US dollar index was down 0.2%, supporting dollar-denominated commodities. A weaker dollar can boost dollar-denominated oil prices by reducing the price for consumers using other currencies.
Technical charts indicate short-term bullish targets of $112.50 for Brent and $100 for US oil, according to Wang Tao, a Reuters markets analyst.
Brent crude is up 18% this year and has drawn support from supply losses in Libya, Africa’s third-largest producer before the rebellion against the rule of Muammar Gaddafi.
“The supply situation is quite tight, with the lost production from Libya,” Henton said, adding she sees crude at an average of $115 for the month so there is scope for prices to climb further.