Oil pares biggest 2-day loss since February before supply data

[HONG KONG] Oil pared the biggest two-day loss since February before US government data forecast to show crude stockpiles declined for a sixth week.

Futures rose as much as 1.9 per cent in New York after slumping 7.5 per cent over the previous two sessions as the UK vote to leave the European Union fueled volatility in global markets. The pound climbed after a record rout as Asian equities trimmed a decline amid stimulus optimism. US inventories probably fell by 2.5 million barrels last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday.

Oil has climbed more than 75 per cent from the lowest level in 12 years in February as global supply disruptions and falling output in the US ease a worldwide surplus. Nigeria started a cease-fire with rebels whose attacks on crude infrastructure cut the nation's production, according to Emmanuel Ibe Kachikwu, Nigeria's state minister for petroleum resources.

"The oil fundamentals may struggle to have a huge influence on where the price is going given the market volatility," Angus Nicholson, a markets analyst in Melbourne at IG Ltd, said by phone. "Oil is still above $45 and the market is increasingly moving toward a balance. The inventory numbers will be watched this week for some direction."

West Texas Intermediate for August delivery rose as much as 86 cents to US$47.19 a barrel on the New York Mercantile Exchange and was at US$47.08 at 7:54 am London time. The contract slid US$1.31 to US$46.33 on Monday. Total volume traded was about 5 per cent below the 100-day average.

Brent for August settlement climbed as much as 81 cents, or 1.7 per cent, to US$47.97 a barrel on the London-based ICE Futures Europe exchange. The contract fell US$1.25 to US$47.16 on Monday. The global benchmark crude was at a 76-cent premium to WTI.

While US crude stockpiles dropped to 530.6 million barrels through June 17, supplies still remain more than 100 million barrels above the five-year average, according to data from the EIA. Production has slipped to 8.7 million barrels a day, the lowest level since September 2014.

BLOOMBERG