Oil rebounded from the lowest level in almost four months in New York on speculation that the biggest decline this year was exaggerated.
West Texas Intermediate climbed as much as 1.4 percent, after its 14-day relative strength index plunged to 38.5 yesterday, a sign that prices may be oversold. Crude slumped 4.8 percent yesterday after U.S. stockpiles gained and fuel demand dropped, while President Barack Obama’s re-election stoked concern that the struggle to resolve deficit-reduction talks may harm the economy.
“Oil prices have experienced quite a rollercoaster ride in the past days, and today’s move looks like technical trading as traders re-balance their positions after the election,” said Michael Poulsen, an analyst at Global Risk Management in Middelfart, Denmark. “There’s a slight bias to the upside today that might mean room for a move up of $1 or so.”
Oil for December delivery rose as much as $1.16 to $85.60 a barrel in electronic trading on the New York Mercantile Exchange. The contract was at $85.51 at 12:45 p.m. London time. It lost $4.27 yesterday to $84.44, the lowest close since July 10. Prices are down 13 percent this year.
Brent for December settlement on the London-based ICE Futures Europe exchange gained as much as $1.11, or 1 percent, to $107.93 a barrel. It slid $4.25, or 3.8 percent to $106.82 yesterday. The benchmark grade for more than half the world’s oil was at a premium of $22.25 to New York crude. The spread widened to a one-week high of $22.38 yesterday.
Oil in New York is also rebounding after reaching technical support along the lower Bollinger Band on the daily chart yesterday, according to data compiled by Bloomberg. Futures have pared losses after reaching this indicator, around $83.25 a barrel today, for the past two weeks. Buy orders tend to be clustered near chart-support levels.
U.S. crude stockpiles rose 1.77 million barrels to 374.8 million in the week ended Nov. 2, the Energy Department said yesterday in a weekly report. Supplies were forecast to advance 2 million barrels, according to the median estimate of 11 analysts surveyed by Bloomberg News.
Gasoline inventories rose 2.88 million barrels to 202.4 million, the highest since the week to Aug. 17, the report showed. Distillate-fuel stockpiles, a category that includes diesel and heating oil, were up 131,000 barrels at 118.1 million, the first gain in eight weeks.
Obama faces a battle with the Republican-controlled House of Representatives over about $607 billion of tax increases and federal spending cuts that are set to take effect automatically in January as part of last year’s debt negotiations.
The Congressional Budget Office has said the U.S. economy will contract by as much as 0.5 percent next year if Congress fails to stop the measures known collectively as the “fiscal cliff.”