Oil climbed amid speculation that its drop below $50 a barrel is excessive given projections that U.S. supply will decline.
Brent futures rose 0.9 percent, paring a 5.2 percent fall on Monday. U.S. crude inventories probably declined for a second week, according to a Bloomberg survey before government data Wednesday. Chinese stocks rose Tuesday, with the benchmark index rebounding from a three-week low and a technical indicator signaled the market is due for a bounce.
“There’s been a correlation between oil and Chinese stocks as of late, and there was a pretty positive night there,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “We’re also expecting a storage draw here.”
Oil is trading in a bear market both in London and New York as growing supplies and signs of slower economic growth in China fuel a rout in commodities from rubber to copper. U.S. crude inventories remain about 100 million barrels above the five-year seasonal average. American refinery operations, which surge in July as they meet summer gasoline demand, typically slow down from August through October for maintenance.
Brent for September settlement rose 47 cents to close at $49.99 a barrel on the London-based ICE Futures Europe exchange. The contract dropped to $49.52 on Monday, the lowest close since Jan. 29.
West Texas Intermediate for September delivery increased 57 cents, or 1.3 percent, to settle at $45.74 a barrel on the New York Mercantile Exchange. Total volume was 19 percent below the 100-day average at 2:46 p.m. It declined to $45.17 on Monday, the lowest close since March 19. The U.S. benchmark crude closed at a $4.25 discount to Brent.
September WTI was up from the close after the American Petroleum Institute was said to report U.S. crude supplies fell last week. Stockpiles slipped 2.4 million barrels, according to a ForexLive report. The contract traded at $45.92 at 4:40 p.m.
Brent’s 14-day relative strength index was at about 23 today, data compiled by Bloomberg show. That’s a seventh day below 30, signaling that the market is oversold and further losses probably can’t be sustained. The 14-day RSI for WTI was about 27.
“We’re oversold and due for a short-covering rally,” Tom Finlon, Jupiter, Florida-based director of Energy Analytics Group LLC, said by phone. “This does nothing to change my view that we’re in a bearish market and have lower to go.”
Crude stockpiles in the U.S. probably fell by 2 million barrels last week, according to the median estimate in a Bloomberg survey of nine analysts before an Energy Information Administration report Wednesday.
U.S. Secretary of State John Kerry said on Monday that foreign ministers from the Gulf Cooperation Council agreed Iran’s accord with world powers, curbing its nuclear program in return for easing sanctions, will add to regional security. Iran can boost oil output by 500,000 barrels a day within a week of the lifting of curbs, the state-run Islamic Republic News Agency reported, citing Oil Minister Bijan Namdar Zanganeh.
“Seasonal changes in demand have been brought on and the Iranian news has been in the market for some time,” Dan Heckman, senior fixed-income strategist at U.S. Bank Wealth Management, which oversees about $127 billion in Kansas City, Missouri. “We should be getting a bottom put in if we can maintain these levels.”
China’s official Purchasing Managers’ Index and a factory index both fell in July, indicating that efforts to bolster the world’s second-largest economy have yet to fuel a recovery. The Bloomberg Commodity Index of 22 raw materials lost about 11 percent in July to the lowest since 2002.