Oil rebounded from four-week lows on Thursday as a weaker dollar and cautious optimism about Ireland’s debt crisis rekindled interest for commodities, while a sharp crude inventory decline in top consumer the United States supported prices.
Front month U.S. crude on Wednesday touched $80.06 a barrel, the lowest intra-day price since October 20, capping a four-session drop that knocked off about 8 percent from a 25-month high of $88.63 a week ago amid concerns about European sovereign debt and a potential increase in Chinese interest rates.
The December contract on Thursday rose $1.10 to $81.54 at 0746 GMT. ICE Brent gained $1.09 to $84.37.
Ireland agreed on Wednesday to work with a European Union-IMF mission on urgent steps to shore up its shattered banking sector, a process that could lead to a bailout despite Dublin’s deep reluctance.
“There is concern about Europe, but markets have already priced that in quite aggressively in the past few days,” said Mark Pervan, a senior commodities analyst at ANZ in Melbourne.
“This is a bit of a buy-on-the-dip story, with equity markets giving a reasonable guide in Asia. Inventory data was put to the side yesterday, but the crude numbers look pretty good and today’s move could be a late response.”
U.S. crude stocks plunged the most in more than 14 months last week as fewer imports and higher refining rates slashed inventories, according to a weekly government report from the Energy Information Administration on Wednesday.
WTI DISCOUNT WIDENS
Inventories fell unexpectedly by a sharp 7.29 million barrels to 357.6 million barrels in the week to November 12, while crude imports fell 226,000 barrels per day (bpd) to 7.83 million bpd.
Stocks of oil products also fell, although more closely in line with analyst expectations. Gasoline fell by 2.66 million barrels, versus forecasts for an 800,000-barrel draw, while distillate stocks declined 1.11 million barrels compared with a projected 2.2 million barrel drop.
But crude inventories at the key Cushing, Oklahoma hub rose 1.27 million barrels to 33.07 million, depressing the value of U.S. crude relative to European benchmark Brent.
Cushing is the delivery point for the New York Mercantile Exchange’s benchmark West Texas Intermediate (WTI) crude futures.
Stockpiles at Cushing will probably keep rising for the rest of the year, in line with seasonal norms, according to JP Morgan oil analyst Sung K. Yoo.
The dollar dipped against the euro on Thursday after subdued U.S. inflation supported the U.S. Federal Reserve’s case for quantitative easing, while Asian equities stabilized after an eight-day sell-off. The greenback slid about 0.4 percent against a basket of currencies.
U.S. consumer prices rose less than expected in October and the increase in the year-on-year core rate was the smallest on record, data showed on Wednesday.