Brent crude oil rose more than $1 per barrel on Tuesday, shaking off early losses as rumors spread that South Korea would create new incentives for refiners to import crude that could bolster demand.
Brent crude oil prices jumped and volume spiked just before noon EDT, as talk circulated that the Asian importer would offer rebates for importing crude. Several traders said the rebates would cover non-Middle Eastern grades as part of a South Korean effort to diversify supply. Officials in Seoul were not immediately available to comment.
Brent's premium to U.S. crude posted its largest percentage gain since last August, rising to over $10 as U.S. crude prices slipped.
"There's a lot of market speculation that the South Koreans are going to change their tax policy on non-agricultural imports," said Andy Lebow, vice president at Jefferies Bache in New York. "That seemed to have rallied the Brent market."
Such a move by South Korea could boost demand for crudes priced off international benchmark Brent. A previous import tax regime had made it profitable for South Korean refiners to import North Sea oil, which traders cited at the time as supporting crude grades from that region, including Brent.
Brent crude futures rose to a session-high of $103.58 following the rumor, and settled up $1.18 at $103.24 a barrel. Brent had traded as low as $101.47 a barrel earlier in the session.
U.S. light, sweet ended down 14 cents at $93.31 a barrel, after losing over $1 earlier in the session.
Earlier in the session, both Brent and U.S. crude had fallen over lingering demand concerns after economic reports from the U.S. and China, the world's two largest oil consumers, indicated a faltering recovery.
"The market's been seesawing all day. It's range trading and looking for direction, but there's no clear direction either way," said Gene McGillian, analyst with Tradition Energy in Stamford, Connecticut.
Data on Monday showed U.S. factory activity shrank in May to its lowest in nearly four years.
The U.S. data followed figures showing factory activity in China shrank for the first time in seven months.