Oil reversed the previous session's losses and rose above $60 a barrel today, thanks to improved sentiment amid a stock market rally, but lingering fears of the deep and long recession capped oil's gains.
US crude for August delivery rose 52 cents to $60.21 a barrel by 7.56am. The contract finished down 20 cents at $59.69 yesterday, after briefly touching its lowest level in almost two months.
London Brent crude rose 54 cents to $61.23.
“Investors are still nervous about going into the commodities markets in a big way. One day of gains on the equities markets isn't going to be enough for investors to change their sentiments entirely,” said Ben Westmore, a commodities analyst at the National Bank of Australia.
“Market players are still trying to reassess how long this recovery is going to take and it will probably need a good week of gains on the stock markets before their appetite for commodities investment increases.”
Asian stocks bounced today as a rally in US financial shares helped Japan break a 10-session losing streak, while also reversing a little of the recent safe-haven rush into the yen.
Expectations that US crude stocks fell last week also lent some support to oil prices.
US crude oil inventories likely fell last week for the sixth straight week, a Reuters survey of nine analysts on Monday showed ahead of weekly inventory data, with some analysts expecting imports to be down amid weak demand.
The industry group American Petroleum Institute (API) will release its report later today, while a US government agency, the Energy Information Association, will issue its own report on Wednesday.
Oil's recent losses, which have partially reversed the 40 per cent spike of last quarter, come amid growing macroeconomic pessimism as a slew of economic data released across the globe has shown that an economic recovery would probably be patchy, if it comes at all, later this year.
Analysts said uncertainties over plans by US regulators to rein in excessive speculation in energy and commodity markets were also chipping away at investors' appetite.
“Such moves have served to instil a fear factor among commodity market participants, resulting in a sharp reduction in net long positions in the crude oil market,” Barclays Capital said in a Monday report. Key economic data expected today.
Reuters