Perth: Oil edged up towards $107 a barrel on Wednesday, pausing from its 2.5 % decline a day earlier, as forecast of a drop in US crude stocks more than offset doubts about the US government’s financial rescue plan.
But gains were limited by a rebound in the US dollar.
US light crude for November delivery rose 26 cents to $106.87 a barrel after settling down $2.76 at $106.61 on Tuesday. London Brent crude rose 30 cents to $103.38.
The losses on Tuesday followed a record surge of nearly 16% in the now-expired US October crude contract on Monday. The US Commodity Futures Trading Commission said it was reviewing the price jump to ensure trading was valid.
Oil jumped nearly 7% on Friday to cap its biggest three-day rally in a decade on expectations a $700 billion US government bailout plan would put an end to the global financial crisis and support demand in the world’s top energy consumer.
But the initial euphoria has given way to doubts amid concerns that political resistance could delay the rescue package.
Oil has gained 11.4% so far this year on geopolitical tensions between Iran and the West, supply disruptions in Nigeria and falling US dollar, but is still 27% below the record price over $147 it hit in mid-July.
A Reuters poll of analysts ahead of weekly US government inventory data due later on Wednesday forecast that crude stocks fell for the fifth week by 2.0 million barrels last week due to disruptions caused by Ike.
Distillate stocks were forecast to have fallen by 1.5 million barrels, with gasoline stocks expected to have dropped for the ninth straight week by 4 million barrels after Ike shut Gulf Coast refineries.
A slow recovery in oil and gas production in US Gulf of Mexico, home to a quarter of US output, also lent support to prices.
Energy firms continued to work on restarting production, refineries and pipelines after Hurricane Ike battered US oil infrastructure. But nearly 70% of production remains closed in the Gulf of Mexico.