By: Reuters – Oil prices rose on Tuesday on apparent bargain hunting, recovering some ground from the previous day’s plunge.
But gains were limited as investors remained cautious ahead of key policy decisions by central banks and on weak economic data from China.
Brent crude futures climbed $2.28, or 3.2%, to $74.12 a barrel by 1330 GMT. U.S. West Texas Intermediate (WTI) crude was at $69.22 a barrel, up $2.10, or 3.1%.
Equities, which often trade in tandem with oil, also rose.
Brent’s six-month backwardation, a market structure whereby shorter-dated futures trade above longer-dated ones, has fallen to its lowest since March at around $1.30, indicating faltering market confidence in demand outstripping supply over the year.
“For market participants to start building up long positions again, they likely need to see larger inventory declines,” said UBS strategist Giovanni Staunovo, adding he expected this to happen within weeks.
Both benchmarks fell around $3 a barrel on Monday after analysts highlighted rising global supplies and concerns about demand growth just ahead of a U.S. Fed monetary policy meeting concluding on Wednesday.
Most market participants expect the Fed to leave interest rates unchanged, a view boosted after data showed U.S. consumer prices barely rose in May.
The Fed’s rate hikes have strengthened the greenback, making dollar-denominated commodities more expensive for holders of other currencies and weighing on oil prices. So, a rate hike pause could be bullish.
The European Central Bank, meanwhile, is expected to hike interest rates on Thursday.
In the world’s biggest crude importer, China, which posted disappointing economic data last week, the central bank lowered a short-term lending rate to restore market confidence.
Demand jitters offset a temporary boost in oil prices from Saudi Arabia’s pledge to cut more production in July.
The Organization of Petroleum Exporting Countries (OPEC) kept its forecast for 2023 global oil demand growth steady for a fourth month on Tuesday, slightly increasing expectations of Chinese demand growth.
Another monthly report by the International Energy Agency (IEA) due on Wednesday will provide further trading cues.
