Oil Up Second Day As Covering Support Stops Slide To 11-Year Low
NEW YORK, Dec 15 (Reuters) - Oil prices rose for a second straight day on Tuesday as short-covering and technical support halted a slide to 11-year lows, but the market remained fundamentally weak from oversupply, traders and analysts said.
Government data on U.S. crude inventories and an expected Federal Reserve interest rate increase would dictate Wednesday's direction, they said.
Brent crude futures settled up more than 1 percent while U.S. crude's West Texas Intermediate (WTI) futures rose nearly 3 percent as oil bears once again failed to push prices to below a seven-year trough.
"Everyone was looking at 11-year lows, but I think people got a sense of 'bids' when they tried probing there," said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland. "But I'd be surprised if they don't come back and take it down."
Brent settled up 53 cents at $38.45 a barrel, after reaching a session high at $39.41. On Monday, the global oil benchmark came within 14 cents of a December 2008 bottom of $36.20, unleashing a surge of buying support.
WTI settled up $1.04 at $37.35. It fell to $34.53 on Monday, the lowest since its financial crisis bottom of $32.40.
"People are buying on the dips," said Jeffrey Grossman, crude dealer at New York's BRG Brokerage who expects Brent to return closer to the $40-a-barrel level it fell under last week.
Gains in oil were restrained somewhat by a firm dollar ahead of expectations that the Fed on Wednesday will announce the first increase in almost a decade. A stronger greenback makes dollar-denominated oil less affordable to euro holders.
"We remain reluctant to suggest that a long-term price bottom has been established anywhere across the complex," said Jim Ritterbusch, founder of Chicago-based oil consultancy Ritterbusch & Associates.
"Although we have shifted off of the short side of WTI following last week's drop to below 37.75, we will look to re-establish shorts into the February futures on further advances to the $41 area."
Credit ratings agency Moody's cut its 2016 Brent estimate to $43 from $53, citing oversupply.
Danske Bank said crude could hit $25 before output declines push prices back up.
Notwithstanding the global oil glut, analysts polled by Reuters estimated that U.S. crude stockpiles fell by 1.4 million barrels last week.
Industry group American Petroleum Institute (API) will issue its own stockpile report at 4:30 PM ET (2130 GMT), ahead of Wednesday's official data from the Energy Information Administration (EIA).
(Additional reporting by Karolin Schaps in London, Sabina Zawadzki in Copenhagen, Henning Gloystein in Singapore and Aaron Sheldrick in Tokyo; Editing by Tom Heneghan, Bill Trott, Lisa Von Ahn and Steve Orlofsky)
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