Oil rose above $49 a barrel this morning, recouping some of the previous session's 7 per cent loss as stock markets edged up.
Talk by the Obama administration of takeover and bankruptcy for two major US automakers, as well as bank rescues in Europe, prompted investors to book profits after a recent run-up in oil to a four-month high.
But Asian stocks edged up today and were set to score their biggest monthly rise in a decade as some investors bet the most painful stretch of corporate earnings damage may be over.
US oil for May delivery rose 70 cents to $49.11 a barrel by 5.46am. The contract settled down $3.97 at $48.41 a barrel yesterday. London Brent crude rose 70 cents to $50.90.
Oil has risen about 9.5 per cent in March, and is headed for its largest monthly and quarterly gain since June 2008, thanks to rallying stock markets and tightening oil supplies as the Organization of the Petroleum Exporting Countries (OPEC) curbs exports.
But despite recent gains, prices are still down nearly $100 from the peak struck last July, as the global economic crash has shrunk demand for fuels.
“Oil is being propped up by firmer stocks and a modest rebound in the euro versus the dollar,” said Michelle Kwek, an analyst at Informa Global Markets in Singapore.
“But upside momentum back above the $50 levels continues to be lacking amid concerns that imminent bankruptcies in the US auto sector would deepen the crisis, leading to further reduction in global demand.”
Further evidence of weakening demand came from Japan where crude oil imports in February fell 3.3 per cent from a year ago.
The next major evidence on oil demand will be Energy Information Administration data tomorrow, which is expected to show US crude oil inventories rose last week for the fourth consecutive time amid higher imports and low refinery demand.
A heavy calendar of economic data is coming up and negative surprises from any of them, including yesterday's US retail sales and consumer confidence, could drag oil prices lower still, analysts said.
Investors will also keep a keen eye on developments at the G-20 meeting, whereby US President Barack Obama will urge other world leaders to step up their stimulus plans.
Leaders of the Group of 20 developed and developing nations meet on April 2nd, with OPEC hoping it will agree on measures to shore up the global economy and bolster oil demand.
Reuters