×

US oil ends 3.3 pct higher, at $47.85, amid post-Brexit bargain hunting

A worker stands next to a pump jack at an oil field Sergeyevskoye owned by Bashneft company north from Ufa, Bashkortostan, Russia.
Sergei Karpukhin | Reuters
A worker stands next to a pump jack at an oil field Sergeyevskoye owned by Bashneft company north from Ufa, Bashkortostan, Russia.

Oil prices closed higher Tuesday as investors bought back into the market after a two-day rout triggered by Britain's vote to leave the European Union.

Potential oil supply outages and crude inventory drawdowns also returned investors' attention to market fundamentals.

A looming strike at several Norwegian oil and gas fields that threatened output in western Europe's biggest producer helped put a floor beneath crude futures after an 8 percent price slump over two days.

Investors were also counting on a sizable and a sixth weekly drop in U.S. crude stockpiles, with oil market analysts polled by Reuters forecasting a 2.4 million-barrel drawdown.

Trade group The American Petroleum Institute will issue a preliminary report on crude inventories at 4:30 p.m. EDT (2030 GMT), ahead of official stockpiles data from the U.S. government on Wednesday.

A report by industry monitor Genscape that showed a 1.3 million barrel fall in crude inventories at the benchmark's pricing hub in Cushing, Oklahoma, added further support, brokerage PVM said.

"Oil is recovering on some bargain hunting after the drop below $47 a barrel proved unsustainable and (on) news of a possible strike in Norwegian oil and gas industry," said Commerzbank analyst Carsten Fritsch.

Brent crude futures traded $1.44, or 3 percent, higher at $48.61 per barrel. The contract earlier peaked at $48.58.

U.S. West Texas Intermediate (WTI) futures settled $1.52 higher, or 3.3 percent, at $47.85. It hit a session high of $47.81 earlier in the session.

The benchmarks fell nearly $4 a barrel in the past two sessions, with Brent hitting seven-week lows under $47 and U.S. crude a one-month trough below $46.

Tuesday's recovery came as the dollar retreated from three-month highs, making greenback-denominated crude more attractive to holders of the euro and other currencies. Risk appetite also rebounded across financial markets on reduced fears of contagion from last week's so-called Brexit.

Sterling and London's FTSE 100 stock market index also recovered sharply on hopes of a coordinated central bank response to financial market losses.

Some analysts were wary, saying more evidence of fundamental strength was needed to assure the market was on the path to a sustainable rally.

Data showed oil production out of Nigeria, the focus on much supply outages over the past few months due to rebel attacks on oil infrastructure there, was back up at around 1.9 million barrels per day from an early June low of 1.6 million bpd.

"So far, I would categorize today's current move higher as a corrective move after the strong push lower since last Thursday," Dominick Chirichella, senior partner at the Energy Management Institute in New York, said, pinning a neutral to slightly bearish view on crude prices.

"More time is needed to safely say the down move in oil is officially over."