Oil edged above $68 a barrel today, reversing part of the previous day's slide of 3 percent, after industry data showed a sharp fall in US crude stocks, boosting hopes of a demand rebound in the world's top energy user.
The release of more closely watched US Energy Information Administration (EIA) data later in the day could confirm the bullish report from the American Petroleum Institute (API), and further underpin market sentiment.
More economic data due later - August unemployment figures and July factory orders, both which are expected to be positive - could underscore the US economy's gradual pace of recovery and offer more trading cues.
By 7am, US crude for October delivery was up 54 cents at $68.59 a barrel, after touching a two-week low of $68.01 in early trade, and falling nearly 3 per cent to settle yesterday at $68.05. London Brent crude rose 53 cents to $68.26 a barrel.
"Sentiment has become a little bit less bullish in recent sessions, because the economic recovery has already been factored into oil prices, and I think the market has risen a little ahead of the fundamentals," said David Moore, commodity strategist with the Commonwealth Bank of Australia.
Oil's decline came as economic concerns sent investors scurrying into safer havens like the US dollar, outweighing positive US manufacturing and home sales data yesterday.
Wall Street fell for a third straight day as renewed worries about the balance sheets of US banks spooked investors.
Japan's Nikkei average sank 2.5 per cent on Wednesday, with exporters hurt by a stronger yen and sentiment dented by uncertainty over the US financial sector's health.
But the release of API data showing that US crude stocks fell 3.2 million barrels in the week to August 28th, larger than the forecast of a 600,000-barrel drawdown, helped oil recoup some losses.
The EIA will release its own inventory report at 3pm.
Reuters