Global prices of crude on Tuesday went up from multi-month lows, backed by a rally in the stock market in China, the second largest oil consumer in the world. However, traders and analysts said that a weak demand outlook and abundant supply are unlikely to hold on to the crude rebound.
Global benchmark for oil Brent as well as U.S. crude settled at a higher level for the first time in four sessions. This was reported a day after the 5 per cent rout triggered on Monday by China’s weak factory activity.
The recovery was supported by the overnight increase in Chinese equities and the rather short-covering normal phase after an oil selloff. Be that as it may, the growing gap between crude demand and projected supply for the same could, traders say, overwrite any rally.
The Paris-based International Energy Agency, the U.S. Energy Information Administration, and the Organization of the Petroleum Exporting Countries are yet to report their monthly updates on barrels per day of oil required by the market, as against that under production or in storage.
The output of the Organization of the Petroleum Exporting Countries in July settled at the highest monthly level recorded in recent times, according to a Reuters survey.
Offsetting a part of the bearish sentiment, it was reported by the American Petroleum Institute that U.S. crude inventories slipped by 2.4 million barrels last week. This was more than that predicted by analysts in the Reuters survey (1.5 million barrels).
Coming ahead of the official inventory data on Wednesday and after the market closed on Tuesday, the report helped U.S. and Brent crude futures increase post-settlement trade gains by just a little.
Brent settled up 1 per cent or 47 cents to reach US$ 49.99 per barrel. Brent had hit the bottom with US$ 49.19 in 2015 and Monday’s numbers reached a six-month low.