Oil rose above $50 a barrel today, recovering after an earlier fall, as a stock market rally countered the impact of weakening global oil demand and forecasts for rising US supplies.
European stocks rose and bank shares surged as better-than-expected results from Goldman Sachs added to confidence the sector may be through the worst, analysts said.
"Oil fundamentals are in dire shape for this year," said David Hufton of oil brokers PVM.
"However, they are no more than a drag on a market that is paying far more attention to financial indicators. If the stock markets rally, then so will oil."
US crude was up 61 cents at $50.66 a barrel at 10.30am, after falling as low as $48.96. ICE Brent crude climbed $1.08 to $53.22.
Oil fell more than 4 per cent yesterday after the International Energy Agency, adviser to 28 industrialised countries on energy policy, sharply cut its world oil demand forecast for 2009.
Dealers will be seeking any confirmation of the IEA's demand forecast this week. The US Energy Information Administration releases its short-term energy outlook today and OPEC publishes its monthly view tomorrow.
In addition to the forecasts for global supply and demand, traders will also focus on the latest snapshot of supply in top consumer the United States.
US crude oil supplies rose for the sixth consecutive time last week as imports rebounded, and that could have lifted inventories to the highest in almost 19 years, a Reuters poll of analysts showed yesterday.
The poll of eight analysts showed an average forecast for a 2.2 million-barrel increase in crude inventories.
Industry group the American Petroleum Institute issues its inventory report later on Tuesday. The EIA releases its own data tomorrow.
Reuters