Oil prices rebound on bargain hunting before Fed
The oil market rebounded on Tuesday as traders shrugged off poor US economic data to snap up bargain crude following recent losses, and awaited the Federal Reserve's next move on stimulus.
Traders said prices also gained ground on worries that another severe cold snap in the United States would boost demand and dent heating fuel reserves in the world's top crude consuming nation.
New York's main contract, West Texas Intermediate (WTI) for March, rallied $1.54 to $97.26 a barrel.
Brent North Sea crude for delivery in March rose 62 cents to $107.31 per barrel in late afternoon deals in London.
Wall Street stocks also moved higher in early trading on Tuesday, overcoming a poor durable goods report and a disappointing outlook from Apple.
"US oil prices have pulled back some ground after two consecutive days of declines to hold up fairly well, despite this afternoon's disappointing US economic data," said CMC Markets analyst Michael Hewson.
"The cold weather premium which has driven the rally for the past two weeks continues to prevent a larger sell-off."
Investors were eagerly awaiting the outcome of a two-day US Federal Reserve policy meeting scheduled to end Wednesday.
The US central bank's Federal Open Market Committee (FOMC) is widely expected to decide on a further $10 billion reduction in its monthly asset purchases, to $65 billion.
In December, the FOMC said it would begin tapering the stimulus by $10 billion to $75 billion a month in January.
The so-called tapering of the Fed's asset purchases would likely boost the greenback, making dollar-priced oil more expensive for countries using other currencies, dampening demand.
Crude futures had fallen sharply on Monday, tracking heavy losses in global equity markets spurred by weak corporate earnings and uncertainty in emerging economies.
"In the oil market, longer-term bearish concerns took over from short-term bullish developments as bulls decided to take profit," added analysts at PVM Associates in reference to Monday's trade.
"Emerging market developments, which are believed to have a negative impact on oil demand growth, were the focus of attention."
Financial markets have also been shaken this week by data last week indicating manufacturing activity in China -- the world's top energy consumer and a key driver of global growth -- had contracted in January.
"Markets remain skittish and the mood is somewhat cautious as the focus remains on emerging market travails," French bank Credit Agricole said in a note.
"The current bout of pressure may yet be contained but there is still some way to go before market stress is alleviated," it said.
Meanwhile on Wednesday, the US government's Energy Information Administration (EIA) will publish its latest energy inventories report.
Most analysts expect it will show another sharp drop in US stockpiles of distillates, which include heating fuel and diesel.
© 2014 AFP