Oil prices bounced back above $73 a barrel today, with traders catching their breath after an unexpected build in US crude and petrol inventories extended a steep slump from last week's record high.
US light crude for August delivery rose 49 cents to $73.15 a barrel earlier, attempting to end a three-day slide that has wiped more than 5 per cent off prices. London Brent crude for September climbed 46 cents to $74.36.
Oil tumbled 88 cents yesterday after US government data showed inventories of gasoline rose by 1.5 million barrels and crude stocks climbed 0.2 million barrels due to strong imports, counter to expectations of a decline in supplies.
But the data also showed that four-week average US petrol demand, which accounts for more than a tenth of the world's total consumption of oil, had risen 1.9 per cent from a year ago.
"Follow-through price action should be bullish, due to strong gasoline demand of 9.6 mb/d over the last four weeks," Calyon investment bank energy analyst Mike Wittner said in a note.
But he warned that fundamentals may be overwhelmed by the downward momentum of the steep profit-taking decline from Friday's record $78.40 a barrel, as a fear premium caused by flaring violence between Israel and Hizbollah dissipated.
"This correction from a geopolitical spike may overwhelm continued strong fundamentals in the very near-term," he said.
Oil, which moved in lockstep with tumbling metals prices earlier this week as investors fled the whole complex, diverged on Wednesday when gold and other commodities rallied on signals of a possible pause in the US interest-rate rise cycle.
Federal Reserve Chairman Ben Bernanke told the Senate Banking Committee that while the U.S. economy still faced inflation risks, cooler growth should curb price pressures over time. OPEC President Edmund Daukoru said that current price levels posed a threat to the world economy, but a price in the mid-60-dollar range would be more acceptable