Crude oil rebounds from lowest in week

Crude oil rebounded from its lowest level in a week as a declining dollar and advancing equity markets tempered concern that US fuel supplies are excessive.

An Energy Department report on Wednesday will probably show US crude inventories grew by 1.2 million barrels, or 0.3 percent, last week to their highest level since July 23, according to a Bloomberg News survey. European and Asian stocks rose after China's manufacturing expanded at a faster pace than expected.

"I'm not in the double-dip camp," said Thorbjoern Bak Jensen, an analyst at Global Risk Management in Middelfart, Denmark. "I see the numbers primarily as a bump on the road towards recovery."

The October contract on the New York Mercantile Exchange rose 64 cents to $72.56 a barrel as of 11:29 am London time. On Tuesday, it fell $2.78, or 3.7 percent, to $71.92, the biggest drop since June 4 and the lowest settlement since Aug 24. Brent crude for October settlement climbed as much as $1.01, or 1.4 percent, to $75.65 on the ICE Futures Europe Exchange in London.

Futures in New York are trading at their widest discount to North Sea Brent in three months on concern that US fuel inventories may rise as the economic recovery slows.

The West Texas Intermediate contract on the New York Mercantile Exchange, which historically has held a premium over Brent, is about $2.29 a barrel cheaper for October delivery than the London benchmark. That's the biggest spread since May 20.

The dollar tumbled 1 percent to $1.28 against the euro, heightening the appeal of using commodities to protect against inflation. The MSCI Asia Pacific Index gained 1.5 percent and the Stoxx Europe 600 Index rose 1.1 percent.

The Energy Department is scheduled to release its weekly report at 10:30 am in Washington. Refineries probably operated at 87.7 percent of capacity, unchanged from a week earlier, the survey showed. Operating rates fell 2.3 percentage points to the lowest level since May in the week ended Aug 20.

Gasoline inventories dropped by 250,000 barrels, or 0.1 percent, from 225.6 million, according to the poll. Stockpiles in the week ended Aug 20 were 12 percent higher than the five-year average for the period, according to the Energy Department.

The American Petroleum Institute said on Tuesday that crude oil inventories rose by 4.77 million barrels last week to 361.5 million, while gasoline inventories dropped 589,000 barrels to 225.6 million.

The industry-funded API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

Prices declined on Tuesday after forecasts that Hurricane Earl will pelt the US East Coast, keeping beachgoers and travelers at home and curbing fuel demand during the Labor Day holiday. The weekend is the traditional end of the US summer driving season, the peak gasoline demand period.

Source:China Daily