Forexpros – Crude oil futures were up on Wednesday, rebounding from the previous day’s sharp selloff as a weaker U.S. dollar and an unexpected decline in U.S. oil supplies countered news of an increase in oil output from top producer Saudi Arabia.
On the New York Mercantile Exchange, light sweet crude futures for delivery in May traded at USD106.64 a barrel during European morning trade, gaining 0.55%.
It earlier rose by as much as 0.7% to trade at a session high of USD106.86 a barrel.
Crude prices tumbled more than 2% on Tuesday, the biggest daily drop in three months as news that Saudi Arabia increased its oil production to the second highest level since 1980 and worries over a slowdown in demand from China weighed.
But prices rebounded after the American Petroleum Institute, an industry group, said after markets closed Tuesday that U.S. crude inventories fell by 1.4 million barrels last week, defying expectations for a gain of 2.4 million barrels.
Oil traders were looking forward to the U.S. Energy Information Administration’s more closely-watched weekly report on U.S. stockpiles of crude and refined products later in the day.
The report was expected to show that U.S. crude oil stockpiles rose by 2.2 million barrels last week, while gasoline supplies were forecast to decline by 2.0 million barrels.
The U.S. is the world’s biggest oil-consuming country, responsible for almost 22% of global oil demand.
Weakness in the U.S. dollar provided further support. The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was down 0.35% to trade at 79.59, the lowest since March 9.
However, market participants continued to monitor production levels in Saudi Arabia after the kingdom’s oil minister Ali al-Naimi said earlier the country can increase crude production by as much as 25% immediately if needed.
“If you believe Hormuz will be closed, I will sell you the Empire State or the Egyptian pyramids,” al-Naimi said in a briefing with reporters in Doha, Qatar today.
The increased Saudi production figures have come in response to lingering fears over a disruption to supplies from Iran.
Iran and Western nations have been locked in a stand-off in recent months over Tehran’s nuclear program.
There are fears that the escalating rift over Tehran’s nuclear program could lead to an oil-export halt, a disruption to shipping traffic in the Strait of Hormuz or military conflict.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for May delivery added 0.3% to trade at 124.48 a barrel, with the spread between the Brent and crude contracts standing at USD17.84.
Societe Generale raised its forecast for Brent oil prices in 2012 by 15% to USD127 a barrel, as spare production capacity in the Organization of Petroleum Exporting Countries shrinks, according to a report published Tuesday.
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