Oil rose to $70 a barrel today in a technical rebound after its 3.2 per cent decline in the previous session, as traders watch for clues to the health of the global economy from a US Federal Reserve meeting and a summit of G20 nations this week.
Oil's fall yesterday followed a re-emergence of demand growth uncertainty in the wake of bearish comments from Asia's top oil refiner, Sinopec, that China's diesel demand remained depressed, while the International Energy Agency said world power output was likely to drop this year for the first time since 1945.
US crude for October delivery rose 36 cents to $70.07 a barrel by 0357 GMT. The contract settled down $2.33 at $69.71 a barrel yesterday.
London Brent crude gained 32 cents to $69.01.
"Oil prices are still rangebound and prices are drifting without a clear sense of direction," said John Vautrain, an analyst at Purvin & Gertz in Singapore.
"Prices have been stuck in the $76-$73 range for a while now and it will need a much more serious news, like either a supply disruption or major demand boost, to push it out of the range."
Analysts said a firm dollar, which has rallied over worries about the sustainability of the recent equities markets rally, would also limit gains in oil prices. The dollar index was down 0.3 per cent at 76.54 points by 0323 GMT.
Oil prices have doubled from their December lows of around $32 a barrel and struck a 2009 high of $75 a barrel in August, thanks to cross-asset ebullience following a stream of positive economic data.
But most analysts agree the fundamentals of supply and demand are still weak and most of the market optimism about a global recovery in energy demand has already been priced in.
China's gasoline exports jumped to their highest since early 2007 and diesel sales remained unexpectedly strong last month, data showed on Tuesday, fuelling concern that domestic demand in the world's number two consumer is failing to keep up with record refinery production.
Analysts said the market will now keep a close watch on comments from the US Federal Reserve meeting and the G20 summit for hints to the pace of the recovery.
The US Federal Reserve begins a two-day monetary policy meeting today and while it is likely to hold interest rates, markets will be watching for any comments indicating the Fed might wind back its super-accommodative policy stance in view of improving economic data. That would boost the dollar if it did, analysts said.
The Asian Development Bank today raised its estimate of 2009 average growth in developing Asian economies to 3.9 per cent from its March forecast of 3.4 per cent, saying that Asia had proved to be more resilient than expected to the global financial crisis.
Reuters