Oil rebounded from multi-month lows on Thursday, with U.S. crude staging a modest recovery from an 8 month low as global tensions and profit-taking momentarily outweighed fears about ample supply.
Oil prices fell in tandem early in the day, but U.S. futures broke higher during morning trade in New York after triggering technical support levels. Its sharp rebound from a 16-month low lowered Brent's premium over U.S. crude to a little more than $5 a barrel, its smallest since July.
Some traders linked the bounce in U.S. crude to news that Russia said air strikes against Islamist militants in Syria without a U.N. Security Council mandate would be an act of aggression.
The West's energy watchdog said on Thursday slowing global economic growth, particularly in China and Europe, had curbed oil demand severely at a time when supplies were growing steadily, particularly from North America.
"The recent slowdown in demand growth is nothing short of remarkable," the International Energy Agency (IEA) said in a monthly report, revising down its oil demand growth projections for 2014 and 2015.
Brent crude for October pared early steep losses, trading flat near $98 a barrel, after closing down $1.12 in the previous session. It earlier hit an intraday low of $97.10, its weakest since April 18, 2013. U.S. crude cut earlier losses to settle up $1.16 at $92.83 a barrel.
The IEA said it expects non-OPEC supply to expand by 1.6 million barrels per day in 2014, and by another 1.3 million bpd in 2015 on the back of the shale oil boom in North America.
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That means the world will need less oil from the Organization of the Petroleum Exporting Countries, and the IEA cut its estimate of demand for OPEC crude and stocks for 2015 by 300,000 bpd to 29.6 million bpd. In August, OPEC pumped 30.31 million bpd.
Underlining the global oil surplus, data from the U.S. Energy Information Administration on Wednesday showed an increase in some U.S. oil product inventories. Stocks of gasoline and distillates jumped by 2.4 million and 4.1 million barrels respectively in the week to Sept. 5, compared with analysts' expectations of a 157,000-barrel drop for gasoline and a 571,000-barrel increase for distillates, EIA data showed.
--By Reuters