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Oil bounced back towards US$95 a barrel yesterday, gaining almost 1 per cent as Asian stock markets steadied and traders bet that falling US inventories and the approaching winter could help restart the oil rally.
US light crude for December delivery rose 81c to US$94.79 a barrel, climbing
back towards the record high of US$96.24 a barrel touched last week after tumbling on Monday on the prospect of more fallout from the US subprime crisis.
London Brent crude rose 81c to US$91.30 a barrel.
Asian stock markets eked out gains early yesterday after tumbling world markets dragged oil US$2 lower just a day earlier, with traders fearing the subprime crisis could temper economic growth and oil demand in the world's top consumer.
Citigroup, the largest US bank, said it was unable to assure investors a potential US$11 billion write-down for subprime mortgages would not increase.
Tokyo's Nikkei stock market average climbed 0.5 per cent yesterday, recovering some ground after a 1.5 per cent slide, while US markets had also clawed back some losses late Monday.
Oil's surge from below US$70 in mid-August has been aided by the weak dollar and speculative inflows into oil and other commodities, and extended lately by a renewed focus on signs of thinning oil supplies ahead of peak winter demand.
US crude oil stocks are expected to have fallen by a further 1.6 million barrels last week owing to disruptions to short-haul Mexican shipments. Stocks normally rise heading into the winter peak season.
Distillate inventories were seen falling by 700,000 barrels and petrol stocks by 100,000 barrels.
Inventories in Japan, the world's third-largest consumer, are also running below comfort levels.
US Energy Secretary Sam Bodman said current prices were a "terrible problem" for consumers, adding he hoped oil producer group Opec would ramp up output to ease prices, although most cartel officials have rejected that call.
Venezuelan Oil Minister Rafael Ramirez on Monday echoed other officials, saying high prices were due to speculation and geopolitical tensions, not a shortfall in supplies.
Markets have been eyeing tensions in the Middle East, although signs of a softening tone added to the market's sell-off a day ago, analysts said.
Iraq said on Saturday that it was ready to arrest Kurdish guerrilla leaders responsible for cross-border raids to avert a major incursion, while US President Bush told Turkey's leader that he was committed to countering the militants.
- Reuters