London: Oil snapped a five-day losing streak to rebound above $76 a barrel on Tuesday, as firmer equity markets and weaker dollar edged out concerns about the pace of global economic recovery.
US crude for September delivery rose 91 cents to $76.15 a barrel by 1:48pm, recovering from a one-month low of $74.86 a barrel hit on Monday.
The new ICE Brent crude future contract for October delivery gained $1.20 to $76.82 a barrel. The September contract expired at $74.85 on Monday.
Since hitting a three-month high of almost $83 a barrel at the beginning of August, prices have declined sharply over the past two weeks, shedding more than 9% on doubts about the pace of the global recovery and rapidly rising US fuel inventories.
US demand for gasoline normally peaks in the driving season from late May to early September as holidaymakers take to the roads. But stockpiles this year have increased for most of that period, bucking the normal trend.
“As you approach this time in the Northern Hemisphere, the driving season is abating, so I don’t see that the demand for gasoline will be heavy,” said Peter McGuire, managing director at CWA Global Markets in Sydney.
Disappointing economic growth data from Japan and sluggish manufacturing numbers in the United States weighed on prices on Monday, but traders will be eyeing the latest US figures on industrial production, producer prices and housing starts on Tuesday for further clues on the state of the recovery.
On Tuesday, European equity markets were up slightly, but the FTSEurofirst 300 is almost flat for the year as a whole, with many analysts saying markets currently lack direction. Japan’s Nikkei average slid 0.4% on Tuesday to its lowest close in more than eight months.
“We are still trading very strong correlations on US crude and we are readjusting in line with implied moves in equity markets, volatility and the euro/dollar,” Petromatrix trading adviser Olivier Jakob said.
The dollar was down slightly against a basket of currencies. A weaker dollar makes oil cheaper for holders of other currencies.
Forecasts ahead of weekly US petroleum inventory reports are for gasoline stockpiles to have remained little changed last week when they stood close to an all time high.
The American Petroleum Institute will publish industry statistics late on Tuesday, followed by government data from the Energy Information Administration (EIA) on Wednesday.
Gasoline stockpiles were forecast to have declined by just 200,000 barrels last week, a Reuters survey showed, while supplies of distillate fuel including diesel were expected to have gained 1.3 million barrels.
Crude inventories probably fell 1.1 million barrels, according to the poll.