Oil Rises After 2-Day Loss; US Inventories Seen Up Again

Reuters

NEW YORK, Oct 28 (Reuters) - Crude oil prices closed higher on Tuesday, with Brent finishing just above $86 a barrel after two straight days of losses, helped by a weaker dollar and a rally on Wall Street.

But worries about a third weekly build in a row in U.S. crude inventories capped gains.

Crude stockpiles in the United States were forecast to have risen 3.4 million barrels in the week to Oct. 24, while inventories of distillates and gasoline were seen lower, according to a Reuters survey.

Industry group American Petroleum Institute will issue its inventory report for the week at 4.30 p.m. EDT (2030 GMT). The U.S. government's Energy Information Administration will release on Wednesday its own official data for the same period.

Oil rode the coattails of U.S. stocks which surged late in Tuesday's session as better-than-expected earnings eased worries about the outlook for corporate America.

"We were treading water through the day, until we latched on in the afternoon to the stockmarket run-up," said Phillip Streible, senior market strategist at RJO Futures in Chicago, Illinois. "To me, this isn't a convincing rebound for oil, and I expect the market to reverse course by tomorrow."

Brent for December delivery settled up 20 cents at $86.03 a barrel.

U.S. crude finished up 42 cents at $81.42 a barrel, after hitting a more than two-year low of $79.44 on Monday.

The dollar was down as much as 0.3 percent against a basket of major currencies, after mixed U.S. data that showed disappointing domestic home prices and durable goods orders and the highest level of consumer confidence in seven years.

Oil prices fell about 1 percent over past two sessions, reacting to a looming contango in U.S. crude futures and Goldman Sachs' cut in its price forecast due to higher projected supplies.

Fears of growing U.S. oil shale supply and OPEC's apparent reluctance to cut its own output have caused prices to fall about 25 percent since the end of June.

While most banks have lower price forecasts next year for Brent and U.S. crude, some analysts think the markets may rebound quicker than projected.

Barclays on Tuesday revised its Brent forecast for the first quarter of 2015 to $88 a barrel, down from $95, and U.S. crude to $78 from $87.

But its London-based commodities research head, Kevin Norrish, said a steadying forward price spread and seasonal demand could aid Brent's recovery.

China's industrial profits slipped in the first nine months, data showed, reinforcing signs of a slowdown in the No. 1 oil importer.

But Virendra Chauhan, analyst at Energy Aspects, told the Reuters Global Oil Forum that China's gasoline demand in September rose by 500,000 barrels per day from the previous year, in spite of the slowing economy.

(Addtional reporting by Sam Wilkin London and Osamu Tsukimori in Tokyo; Editing by Marguerita Choy)

Copyright 2014 Thomson Reuters.



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