Oil edged up on Tuesday, supported by a recovery in the equities market and on a technical bounce for crude after the biggest daily percentage drop in almost a year, but Brent futures stayed well below $70 a barrel.
Brent crude futures gained 48 cents, or 0.7 percent, to settle at $68.12 a barrel. This followed a nearly 4 percent drop in Brent prices on Monday, the largest since June.
Brent had risen to $71 a barrel last week, close to its highest this year. West Texas Intermediate futures rose 50 cents, or 0.8 percent, to settle at $63.51 a barrel.
"There's not really one catalyst for crude being up today," said John Macaluso, analyst at Tyche Capital Advisors. The gains were in part the result of a technical rebound from Monday's losses, as well as a recovery in the equities market, Macaluso said. Wall Street's main indexes were higher on Tuesday as technology and consumer discretionary stocks recovered from Monday's sharp selloff.
Also lending support was Russian Energy Minister Alexander Novak's comments on Tuesday that a joint organization for cooperation between Opec and non-Opec countries may be set up once the current deal on oil output curbs expires at the end of this year. However, an expected increase in US crude inventories limited price gains.
US crude inventories, widely viewed as a litmus test of the broader trend in global inventories, are expected to have risen for the second straight week. According to a Reuters poll on Tuesday, analysts anticipated a 200,000 barrel crude stock build in the week to March 30. The American Petroleum Institute releases its weekly inventory data later on Tuesday and the US government releases its figures on Wednesday.
There is also an element of seasonality at play, said Walter Zimmerman, chief technical analyst at United-ICAP. "Yesterday was a little more dramatic than might typically be the case, but it's entirely in keeping with seasonal peaking risk that the month of April brings to crude oil," he said. Also weighing on the market is speculative length, after money managers last week raised their bullish bets on crude.
"With excessive hedge fund positions still looming over the market, profit-taking should weigh on oil prices over the coming weeks," Julius Baer head of commodities and macro research Norbert Ruecker said.