Brent crude oil ended up almost 1 percent on Tuesday, helped by data showing stronger-than-expected China demand and some technical price recovery after weeks of almost uninterrupted selling. Analysts and traders cautioned, however, that global economic data, especially out of Europe, were still weak amid strong fears of oversupply in crude markets.
"Because of their deep slide over the past couple of weeks, oil prices are kind of overdone on the downside and vulnerable to turnarounds now," said Gene McGillian of Tradition Energy, an oil services advisory firm in Stamford, Connecticut. "But whether we have hit bottom or not remains a question. I would think not given the market's recent performance, the continued swoon of the European economies and the idea that we have more than ample supplies of oil sloshing around the world finding for a home."
US commercial crude oil stockpiles were forecast to have risen in the week ended October 17, while inventories of refined products likely fell, an expanded Reuters survey showed. The American Petroleum Institute (API) will issue a weekly inventory report later on Tuesday, while the US Energy Information Administration (EIA) will release official weekly stockpiles data on Wednesday.
Brent settled up 82 cents at $86.22 a barrel. It rose as much as $1.06, or 1.2 percent, during the session to $86.48. US West Texas Intermediate (WTI) crude finished up 10 cents, or 0.1 percent, at $82.81 a barrel in New York, after hitting a session peak at $84.05.
Implied oil demand in China, the world's largest energy consumer, jumped 6.2 percent in September from August to 10.3 million barrels per day, the highest since February, data showed. China's economy also expanded above forecasts, growing 7.3 percent in the third quarter, although that was the slowest pace since the global financial crisis. Factory output rose 8 percent in September from a year earlier.
"The rise in implied Chinese oil demand may have more to do with filling stockpiles, said Tamas Varga, analyst at London-based brokerage PVM Oil Associates. "Chinese companies have been buying crude oil because it has been cheap." Christopher Bellew, a senior oil broker with Jefferies in London, also cautioned about reading too much into the Chinese data. "Looking forward, I think we'll see more pressure to the downside," Bellew said. "These lower prices will take a while to have any impact on supply."
The International Energy Agency, meanwhile, slashed its world oil demand growth forecast for next year. On Wall Street, investment bank Citigroup cut its forecast for Brent to $92 and US crude to $83 for the fourth quarter. Some members of the Organisation of the Petroleum Exporting Countries (OPEC) have indicated the group is unlikely to cut output ahead of its November 27 meeting. Others are preparing 2015 budgets with lower oil prices.
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