Oil climbed above $38 a barrel this morning lowering some of the previous day's 5 per cent losses, after industry group American Petroleum Institute's weekly data showed crude stockpiles had fallen unexpectedly.
But a downward revision by the US government on its oil demand forecasts, doubts over the effectiveness of the US bank rescue plan and the latest data showing China's January crude imports fell to the lowest in 15 months, capped oil's gains.
US crude for March delivery rose 49 cents or 1.3 per cent to $38.04 a barrel by 7.01am, after settling down $2.01 yesterday.
London Brent crude rose 41 cents to $45.02, stretching its unusual premium to US oil prices to around $7 a barrel, due to a record supply glut that has built up in Cushing, Oklahoma, where the delivery of the US contract is based.
"The API data is helping prices to rebound after last night's sell-off. Oil prices were perhaps a little oversold amid the panic across the equities and commodities markets," said Toby Hassall, chief analyst at Commodities Warrants Australia.
"The macroeconomic data from the US is not painting a picture of swift recovery but the API numbers could be an indication that supply and demand in the spot market is beginning to get a little more balanced."
US crude oil stockpiles unexpectedly fell 1.996 million barrels last week despite an increase in import levels and a decline from refineries, data from the American Petroleum Institute yesterday, bucking expectations that crude stocks would increase by 3.1 million barrels.
Analysts said investors were cautiously optimistic as the API report comes one day ahead of the US Energy Information Administration's (EIA) weekly report on petroleum supply and demand, which is considered to be accurate.
US crude oil inventories rose for the seventh consecutive time last week, analysts forecast in a Reuters poll yesterday, citing a drop in refinery utilisation and higher imports.
Saudi Arabia's oil minister said low oil prices were as unjustified and unsustainable as the record peak above $147 a barrel last summer.
Reuters