NEW YORK (Reuters) - Oil prices steadied on Tuesday, with Brent recovering from near six-month lows and U.S. crude settling more than 1 percent higher as bets for a drop in U.S. stockpiles offset concern over a global oil supply glut and China’s stock market meltdown.
Trades also cited short-covering after a four-day selloff that wiped between 6 and 7 percent from crude futures prices.
Some stayed convinced, however, that oil has more to lose, and that a bottom for crude futures was still far off.
“We’re getting a bounce of sorts but I’ll be selling into any strength I see,” said Tariq Zahir, an oil bear at Tyche Capital Advisors in Laurel Holllow, New York.
Brent futures settled down 17 cents, or 0.3 percent, at $53.30 a barrel. It had hit $52.28 earlier in the session, its lowest since early February, on concern about the stock market plunge in China, the world’s largest energy consumer.
U.S. crude futures settled up 59 cents, or 1.2 percent, at $47.98 a barrel.
Crude futures came off their lows after expectations grew that U.S. crude inventories had fallen last week. Stockpiles had risen to a five-year seasonal average the previous week.
The American Petroleum Institute (API), an industry group, said after the market settlement that U.S. crude inventories fell by 1.9 million barrels last week. A Reuters poll of analysts had forecast a drop of just about 200,000 barrels. Official data on stockpiles will be issued on Wednesday by the U.S. Energy Information Administration. [API/S][EIA/S]
While the API reported a larger-than-expected crude draw, some brokers were troubled by a big build of 4.3 million barrels in stocks of distillate, including diesel, which they fear could hurt overall sentiment for oil.
Futures of ultralow sulfur diesel sank to six-year lows on Tuesday, while gasoline futures hit 3-1/2-month lows on worry over ebbing demand for automotive fuels as the U.S. summer driving season draws to a close. The rally in oil products had powered much of the second-quarter recovery in crude prices.
“A 4.3 million barrel distilates build will renew bearish pressure,” said David Thompson, executive vice-president at Powerhouse, an energy-specialized commodities broker in Washington.
U.S. crude futures hit a 2015 high above $62 just three months ago. Technical analysts think the market could lose another $15.
“Essentially, we see prices staying lower for longer,” Virendra Chauhan, analyst at consultancy Energy Aspects, told the Reuters Global Oil Forum.
Additional reporting by Amanda Cooper in London and Keith Wallis in Singapore; Editing by Marguerita Choy; and Peter Galloway