Oil steadies after four-day loss, U.S. crude stock draw eyed

Oil prices steadied on Tuesday, recovering from near six-month lows, with U.S. crude rising more than 1 percent as bets for a drop in U.S. crude stockpiles offset worries about a global supply glut and equity market meltdown in China.

The market also saw short-covering after a four-day selloff that wiped between six and seven percent off crude futures, traders said.

Some remained convinced, however, that oil had more to lose, and that a bottom for the market 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 per cent, at $53.30 a barrel. It had hit $52.28 earlier in the session, its lowest since early February, on concerns about the stock market plunge in China, the world’s largest energy consumer.

U.S. crude futures settled up 59 cents, or 1.2 per cent, at $47.98 a barrel. It rose more than $1 at the session high after touching its lowest since March at $46.68.

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 in the prior week.

A Reuters poll of analysts showed that U.S. crude inventories may have fallen 200,000 barrels in the week to July 24.

The American Petroleum Institute, an industry group, will release its own stockpile report at 4:30 p.m. on Tuesday before official government data on Wednesday.

U.S. crude futures hit a 2015 high above $62 just three months ago. Technical analysts think the market could lose another $15, falling below the lows of the 2007-2009 financial crisis, due to a combination of poor fundamentals and weak charts.

“Essentially, we see prices staying lower for longer, but that is a function of crude supply response, primarily from the U.S., which remarkably has not shown any signs of slowing at the moment,” said Virendra Chauhan, an analyst at consultancy Energy Aspects, in a discussion in the Reuters Global Oil Forum.