Oil market rebounds on US energy report

29th July 2015, Comments 0 comments

Oil prices rebounded Wednesday as investors digested signs of stronger-than-expected US crude demand in the world's top consuming nation, before the latest Federal Reserve interest rate decision.

US benchmark West Texas Intermediate for delivery in September jumped $1.21 to $49.19 a barrel compared with Tuesday's close.

Brent North Sea crude for September won 61 cents to stand at $53.91 a barrel in London late afternoon deals, having dived on Tuesday to $52.25 -- the lowest since February -- on supply glut fears.

The US government's Department of Energy said Wednesday that American crude inventories tumbled 4.2 million barrels in the week to July 24.

That surprised the market because expectations had been for a gain of 850,000 barrels, according to analysts polled by Bloomberg News.

Falling inventories tend to push prices higher because they indicate strengthening demand in the world's biggest consumer of oil.

"Crude oil prices spiked higher following the latest US inventories (data) which posted a weekly fall of 4.2 million barrels," said analyst Joshua Mahoney at trading firm IG.

"The gradual drawdown of historically high stockpiles means that despite a steady move towards something like normality, the supply and demand picture remains out of kilter -- a fact reflected in the six-month low seen in Brent yesterday."

Crude futures had fallen in earlier deals ahead of the Fed's latest US interest rate call.

The US central bank's policy-setting Federal Open Market Committee (FOMC) will issue a statement at the end of a two-day meet, with investors hoping for clearer signs on the timing of a US interest rate hike.

A rate rise will boost the greenback, making dollar-priced oil more expensive to holders of weaker currencies, hurting demand and helping push crude prices lower.

Investors will "pay close attention to the text of the FOMC statement for any confirmation/insights for the timeline of the first rate hike," Singapore's United Overseas Bank said in a research note.

Worries over the Chinese economy after a recent rout in the country's stock market and global crude oversupply were also keeping buyers at bay, analysts said.

A plunge in Chinese shares this week has stoked fears that demand from the world's second biggest economy will be affected.

Chinese stocks ended the morning session 0.21 percent lower Wednesday, erasing earlier gains and extending a plunge of more than 11 percent in the previous three sessions.

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© 2015 AFP

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