OIL edged up today, rebounding from earlier lows and holding close to the key level of $US100 a barrel as traders await more signals on the strength of the US economy.
Light, sweet crude oil for July delivery settled US11 cents higher at $US100.40 a barrel on the New York Mercantile Exchange, after dropping as low as $US98.46 a barrel earlier in the session. Brent crude oil on the ICE futures exchange ended $US1.04 higher at $US115.57 a barrel.
After a 2.4 per cent drop yesterday, oil prices fluctuated between gains and losses for much of the latest session. A US government report showing increases in oil and petrol stockpiles initially pushed crude oil lower, but prices quickly returned to the middle of a trading range between $US95 and $US105 that has held oil since mid May.
"We still have that gravitational pull toward the $US100 level. Whenever we move a couple bucks from that level, we seem to swing back again," said Jim Ritterbusch, head of oil-trading adviser Ritterbusch and Associates.
US oil stockpiles rose by 2.9 million barrels in the week ended May 27, according to data released by the Department of Energy. Analysts had expected stocks would fall, according to a Dow Jones Newswires survey. Gasoline stocks also rose, adding 2.6 million barrels in the fourth-straight week of increases.
Rising inventories have combined with a string of weak economic reports in recent days to keep pressure on crude oil prices. Yesterday, an index on manufacturing fell short of expectations, while a separate report said the private sector hired 38,000 workers last month, well short of the 190,000 expected by economists.
Early in the latest session, jobless claims saw only a modest decline, suggesting the important monthly jobs report, to be released late tonight (AEST), may be gloomier than analysts had thought.
Many investors have become more pessimistic on the state of the economy over the past month, which has factored into the drop in oil prices from above $US113 a barrel in early May. Concerns are growing that a slowdown in China along with issues related to euro-zone debt will weigh on the global recovery.
Earlier this week, economists from Bank of America-Merrill Lynch lowered their estimates for growth in 2011 US gross domestic product to 2 per cent from 2.8 per cent.
The threat of a slowdown already appears to be contributing to a drop in oil and fuel consumption, as businesses and consumers cut spending in the face of high prices.
US petrol stockpiles have increased for four straight weeks, the Energy Department data showed. In addition, US petrol demand for the Friday before Memorial Day, an important day of travel, fell by 3.7 per cent from a year ago, according to a MasterCard SpendingPulse report released on Tuesday.
"The fact that crude (oil) is still building, still finding its way into storage, it could be that we're seeing a little bit of a slowdown in demand," said Tom Bentz, a director at BNP Paribas Commodity Futures.
"In general, the market is vulnerable because of the weak economic data we've been seeing."
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