Oil rebounded in volatile trading on Thursday following a 5 percent plunge in the previous session as a weaker dollar offset demand worries. Prices dipped early after data showed that the US economy was struggling to gain momentum in the second quarter, and after the International Energy Agency cut its global demand forecast and China further tightened its bank reserve requirements.
Crude turned higher after the dollar dipped 0.29 percent against a basket of currencies. The euro bounced off a six-week low against the greenback as European Central Bank policy maker Lee Coene said April's interest rate rise was "certainly not" a one-off event. "The dollar came under pressure and the stock market looked like it started to pare losses and we seem to have digested the China reserve requirement hike," said Gene McGillian, analyst, Tradition Energy in Stamford, Connecticut.
In London, Brent crude for June delivery was up $1.26 at $113.83 a barrel by 1:35 pm EDT (1735 GMT), up from a session low of $110.15. US June crude rose $1.07 at $99.28, having moved up session low of $95.25 hit early. The day's US economic data showed new filings for jobless benefits fell slightly last week, but the total remained still too high, raising worries about recovery in the job market.
US retail sales posted their smallest increase in nine months in April, with consumers feeling the pinch of higher gasoline pump prices. The International Energy Agency, advisor to industrialised nations, trimmed its global oil demand growth estimates for this year to 1.29 million barrels per day, or 1.5 percent, from 1.43 million bpd in its previous report.
The IEA said gasoline demand could "disappoint" this year as gasoline near $4 a gallon at the pump prompts Americans to drive less. "We clearly have seen demand growth slowing compared to last year's level and we're seeing it very much concentrated where the price feed through is most direct, notably in North America in terms of gasoline," said David Fyfe, head of the IEA's Oil Industry and Markets division.
China's central bank raised the reserve requirements for commercial banks by another 50 basis points as it pursued a campaign to fight inflation despite initial signs of a slowing economy. China is the world's second-largest oil consumer and the source of much of its demand growth.
The day's movements in commodities also saw silver set for its biggest two-week slide in nearly 15 years, along with lower US gasoline futures, pressuring the broader Reuters-Jeferies index to 3-1/2 lows. "We're getting concerns about slowing growth, rising inflation, rising interest rates, money leaving the commodities sector," said Edward Meir, senior commodity metals analyst at MF Global in New York.
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