Crude prices ended higher to rebound from six year lows aided by a by stocks in the worlds’ biggest energy consumer China.
Brent for September delivery, the global benchmark, pared early morning gains but still ended 47 cents or 1% higher at $49.99 a barrel on the London based ICE Futures Exchange. The contract fell by more than 5.2% on Monday to take it below the $50 a barrel level for the first time since January.
Light sweet crude for September delivery added 57 cents or 1.3% at $45.74 a barrel on the New York Mercantile Exchange.
Abundant supplies and slow demand however made the rally unsustainable with oil traders awaiting weekly inventory data from the government backed Energy Information Administration on Wednesday.
Most traders said that although the overnight rally in Chinese stocks aided the recovery of the major benchmark contracts, the gulf between tailing oil demand and growing inventories is likely to continue dragging the commodity down.
The Benchmark Shanghai Composite rallied from its selloff to end higher on measures by Beijing to halt short selling. Sentiment was also partly helped by a rally by other commodities including Copper and Gold.
Analysts polled by the Wall Street Journal expect the Energy Information Administration to report that crude inventories fell by 1.5 million barrels in their report due at 11.15 AM EDT on Wednesday.
“Investor sentiment is going from bad to worse,” Citigroup Inc. analysts told the Wall Street Journal in a note.
“Nothing points to a near-term alleviation of the material oversupply in the market.”
The bearish market mood was partly offset by a report by the American Petroleum Institute which reported that stockpiles in the US fell by 2.4 million barrel last week. This was bigger than the 1.5 million barrel fall consensus estimate of analysts polled by Reuters.
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