London: Brent crude oil rose towards $105 (Dh385.66) a barrel on Wednesday, bouncing from its lowest close in nine months after industry data showed a large drop in US crude stocks last week.
Investors have become increasingly nervous about weak seasonal demand and poor refinery margins in a global market that is well supplied with high quality, light crude oil.
“The weakness comes from speculative length, good supplies of crude and a period of weak demand in the northern hemisphere,” said Christopher Bellew, a broker at Jefferies Bache in London.
Brent crude oil was up 17 cents to $104.78 a barrel by 0845 GMT, after settling on Tuesday at its lowest since November 7.
US crude for September delivery rose 16 cents to $97.54 a barrel, after falling as low as $97.00 on Tuesday, its weakest since early February.
Oil prices have fallen more than $10 a barrel over the past six weeks. Global supply has been running ahead of demand, creating a glut in the Atlantic Basin and Asia.
But demand in the United States continues to be strong.
Crude inventories in the United States fell by 5.5 million barrels to 363.9 million barrels in the week to August 1, data from industry group American Petroleum Institute showed on Tuesday. Analysts polled by Reuters had expected a decrease of 1.7 million barrels.
US government data from the Energy Information Administration (EIA) is due at 1430 GMT.
Investors will study the EIA figures closely for news of supplies at Cushing, Oklahoma, the delivery hub for US futures. Stocks there have fallen close to minimum operating capacity.
The drop in US inventories came after upbeat US economic data this week that included a spike in service-sector activity to a nine-year peak and a surprisingly large increase in factory orders, possible signs of better oil demand to come.
Bellew said he expected the market to consolidate with Brent between $104.50 and $105.50 a barrel.
“The fact that it doesn’t continue downwards is because of uncertainty over supplies out of Libya, possible threats to Iraqi production and general geopolitical risk,” he said.
Senior Iranian officials said on Tuesday they believed Iraqi Prime Minister Nouri Al Maliki was no longer able to hold his country together, and they were working with factions within Iraq to find an alternative leader to combat a Sunni Islamist insurgency.
In Moscow, months of oil talks between Russia and Iran, both heavily sanctioned by the West, took an unexpected twist on Tuesday when Moscow first announced it had agreed with Tehran to help it sell its crude — only to withdraw the statement shortly afterwards.
