Oil rebounded half a percentage point to top $72 today after China's manufacturing industry accelerated last month, easing investors' concern about the faltering pace of global economic recovery.
Prices tumbled 3.7 per cent yesterday on signs that US stockpiles rose further last week and bad weather was set to suppress gasoline demand at the end of the driving season.
Appetite for raw materials was also depressed in the previous session after minutes from the U.S. Federal Reserve's latest meeting showed policymakers saw increasing risks to growth and a regional index of business activity rose less than expected.
October US crude rose 40 cents to $72.32 a barrel, while ICE Brent climbed 41 cents to $75.05.
China's purchasing managers' index (PMI) rose to 51.7 in August from 51.2 in July, official data showed on Wednesday, marking the 18th straight month it has stood above the threshold of 50 separating expansion from contraction in the world's second-largest oil user.
Asian equities also rose on Wednesday as investors cheered China's manufacturing rebound and stronger-than-expected growth in Australia, while the dollar weakend 0.16 per cent against a basket of currencies.
Markets also awaited manufacturing PMI data from the euro zone and the United States later today.
Oil fell more than $7 and almost 9 per cent in August, its biggest monthly percentage loss since May, as the outlook for the US economy deteriorated. Prices hit a 2010 low of $64.24 on May 20th, the weakest front-month price since July 2009, after reaching the peak for this year at $87.15 on May 3rd.
US crude stockpiles jumped 4.8 million barrels last week, the industry-funded American Petroleum Institute (API) said yesterday, more than four times an expected gain of 1.1 million barrels.
Drops in fuel stockpiles were smaller than the crude increase, at 589,000 barrels for gasoline and 1.9 million barrels for distillates including heating oil and diesel, according to the API.
The Energy Information Administration will publish government statistics on inventories and demand today. Expectations are for gasoline supplies to have declined 200,000 barrels and distillates to have gained 1.2 million in the week to August 27th, a Reuters survey showed.
Next Monday's US Labor Day holiday is the traditional end of the summer driving season and MasterCard said weekly retail gasoline demand fell 3.1 per cent last week and managed a rise of only 0.7 per cent versus a year-ago.
Hurricanes, now at the peak of the storm season, could potentially could have a bigger negative effect on gasoline consumption than on crude production and refining. They have so far posed little threat to rigs and refineries on the Gulf of Mexico coast.
Powerful Hurricane Earl churned toward the eastern seaboard yesterday and looked to sideswipe the densely populated coast from North Carolina to New England, the US National Hurricane Center said on Monday.
Forecasters expected the main core of the Category 4 hurricane to stay offshore as Earl moved parallel to the coast during the upcoming Labor Day holiday, disrupting holiday plans.
The centre was monitoring two other tropical systems in the Atlantic, but computer models showed no immediate threat to Gulf of Mexico oil infrastructure.
Reuters