Brent crude climbed above $106 a barrel today after the US Federal Reserve's promise to extend near-zero interest rates for two more years weighed on the dollar and helped reverse a steep fall in oil.
The Fed's unprecedented step prompted investors to get back into riskier assets priced in dollars, with world shares clawing back more ground after a run of heavy losses.
Brent crude for September was up $3.60 to $106.17 a barrel, down from earlier highs of $106.58 a barrel. Prices had flirted with intra-day lows of around $98.70 a barrel in the previous session.
US oil rose by $2.91 to $82.21 a barrel by the same time, after plumbing session-lows yesterday of $79.30 a barrel.
Some analysts warned that despite the initial enthusiasm prices could moderate later in the week as attention again focuses on the prospect of flaccid growth.
The International Energy Agency warned that global oil demand growth could more than halve if the global economy grew slower than expected in 2012.
The agency, which advises industrialised nations on energy policies, said that although it did not make big changes to its oil demand growth estimates for 2011 and 2012 despite a global economic storm, it was very dependent on how the global economy performs in the months to come.
Imports of crude to China during July hit a one year low on a daily basis. Customs data showed it brought in 19.43 million tonnes, or 4.58 million barrels per day (bpd), last month, up 2.5 per cent from a year earlier, but down 1.4 per cent from June.
China's implied oil demand rose 7.7 per cent over a year earlier, picking up from June, which marked the slowest growth in more than two years, according to Reuters calculations.
The Organization of the Petroleum Exporting Countries (Opec) and the US Energy Information Administration cut demand growth forecasts for 2011 in separate monthly reports.
On the inventory front, he American Petroleum Institute, in a report late on Tuesday, said US domestic crude stocks fell 5.2 million barrels last week.
That compares with an expanded Reuters poll that forecast crude stockpiles to have risen for the third straight time last week as releases from the Strategic Petroleum Reserve kept moving into commercial inventories.
Reuters
