Oil rose above $70 a barrel on Tuesday in a cautious rebound after hitting a five-month low the previous day on concerns about the health of the global economy.
But the trend remains uncertain because of persistent investor jitters over the euro currency and swollen US oil inventories.
The euro dipped on Tuesday after a rebound from a four-year trough on Monday.
“The market has been very volatile. My thinking is that obviously the dominant factor is still concern about the international economic outlook, previous developments in Europe, and that’s continuing to weigh heavily on the oil price,” said David Moore, an analyst at the Commonwealth Bank of Australia.
U.S. crude for June delivery rose 54 cents to $70,62 at 0440 GMT, after settling down $1,53 at a five-month low of $70,08 a day earlier.
June crude has fallen 20,5 percent from its 19-month high $87,15 hit on May 3, which could indicate that crude prices may be in for a short-term bounce, technical analysts said.
London Brent crude for July rose 78 cents to $75,88 a barrel.
“Nothing is impossible at the moment. The oil price has been falling dramatically in the past couple of weeks,” said Moore.
“I think at some point it will stablise and recover, but the time is uncertain and the market’s fundamentals are of course very very fragile at present.”
Stockpiles of crude at Cushing, Oklahoma, the delivery hub for the US contract’s West Texas Intermediate benchmark crude, have risen in the last eight weeks to a record high 37 million barrels, pushing front-month US crude down relative to later futures contracts and the other global crude benchmark, Brent.
US crude stockpiles likely rose last week as crude imports rebounded and refinery utilisation held unchanged, a preliminary Reuters poll of analysts showed on Monday.
Ahead of weekly inventory data from industry group American Petroleum Institute (API) on Tuesday and the U.S. government Energy Information Administration (EIA) on Wednesday, crude inventories rose 700 000 barrels on average last week.
That would extend a buildup that started in the last week of January, and post the 15th increase in 16 weeks.
Distillate stocks were forecast at 1,0 million barrels higher while gasoline stockpiles likely fell 1,1 million barrels, the poll showed.
But Goldman Sachs said in a research note on Monday the high stockpiles at Cushing may reverse.
“As we expect refinery runs to continue to increase, we remain confident that the situation in Cushing should reverse over the coming weeks,” it said.
Lawrence Eagles, JP Morgan’s head of commodities research, also agreed that higher refinery runs, boosted by stronger cracks, will reduce Cushing stocks soon.
In China, demand continues to grow while exports are expanding, enabling top Asian oil refiner Sinopec Corp to boost refined fuel sales to a new high of 390 000 tonnes a day.
Sinopec Corp also expects to raise its crude oil imports from Brazil by 43 percent to 200 000 barrels per day next year from 2010.
Japanese manufacturers turned optimistic for the first time in two years in May, a Reuters poll showed, providing further evidence of the economy’s continuing recovery led by Asian demand.-Reuters