Oil rebounded from three-week lows today, staying above $72 as the market assessed the implications of a slowing global economic recovery on energy use.
Rising stock markets in Asia prompted participants to cover short positions in a trading session where volumes were expected to be thin because of the US Independence Day holiday.
"Market participants are thinking that around $70 prices are quite cheap," said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd.
US crude for August climbed 38 cents to $72.52 a barrel by 0350 GMT. The New York Mercantile Exchange (NYMEX) will combine today’s and tomorrow’s trading sessions because of the holiday, with a single settlement price on July 6th.
ICE Brent crude for August rose 41 cents to $72.06.
Prices fell every day last week for a cumulative decline of 8.5 per cent, the steepest weekly drop since early May. They touched $71.62, the lowest intraday level since June 8th, after a report showing a larger-than-expected drop in US nonfarm payrolls for June of 125,000.
Asian stocks edged up today, with investors taking profits on defensive plays and buying back beaten down shares, though selling could resume as the US and Chinese economies are slowing in tandem.
The dollar and US equities fell on Friday after the weak US jobs report rekindled doubts about the strength of recovery, yet failed to confirm widespread fears the economy was dipping back into recession.
A weather system located between Jamaica and Honduras in the Caribbean Sea had a 30 per cent chance of developing over the next two days into a tropical cyclone, a category that includes tropical storms and hurricanes, the US National Hurricane Center said late yesterday.
The system's location and expected course are similar to those that Hurricane Alex followed during its formation stage in late June, before moving into the Gulf of Mexico, forcing Mexican oil terminals to shut down and US producers to curb output.
Gulf of Mexico oil operations continued to restart on Friday after being shut as a precaution before Hurricane Alex hit Mexico last week.
Money managers cut net long crude oil positions on the New York Mercantile Exchange in the week through Tuesday, reducing bets that prices will rise, the Commodity Futures Trading Commission said on Friday.
Open interest positions remained bulked at August crude oil $70 and $65 put options on Friday, an indication that traders are betting prices will fall towards those levels.
Reuters