Benchmarks on both sides of the Atlantic plummeted the day before on a stronger dollar and the prospect of slowing oil demand growth in China and Europe.
US manufacturing activity hit a nearly 3.5-year high last month and construction spending rebounded strongly in July, data showed, raising hopes of higher oil demand in the world’s biggest consumer of the commodity.
“The weak factory data in China and Europe led to concerns over demand destruction, and that’s why prices dropped,” said Avtar Sandu, a senior commodities manager at Phillip Futures in Singapore.
“The oil market is mainly driven by the demand side now. We don’t see many issues on the supply side, and at the moment investors are hardly paying any attention to all the geopolitical events going on,” he said.
Brent crude for October delivery was up 37 cents at $100.71 a barrel early on Wednesday, after closing down $2.45 at its lowest settlement since 1 May, 2013.
US crude was trading 39 cents higher at $93.27 a barrel. The contract had settled $3.08 lower than Friday’s close, the lowest since 14 January. There was no trading in the US on Monday because of the Labor Day holiday.
A stronger dollar weighed on oil prices, after the currency rose to its highest since July 2013 against a basket of major currencies on Tuesday. A stronger greenback makes it more expensive for oil importing countries to buy the dollar-denominated commodity.
US crude and refined product stockpiles were forecast to have dropped in the week to 29 August, with crude stocks projected to have fallen by 1 million barrels, a preliminary Reuters survey of seven analysts showed on Tuesday.
The weekly oil inventory report from industry group American Petroleum Institute (API) due later on Wednesday.
The more closely watched report from the US Department of Energy’s Energy Information Administration (EIA) is due on Thursday. Both reports have been delayed by a day due to Monday’s holiday.
A prolonged shutdown of the Buzzard oilfield in the North Sea could help to ease a glut of crude that has built in the Atlantic basin. The 200,000 barrel per day field may be shut for “up to 10 consecutive days” starting from 30 August when output was last stopped, Calgary-based Nexen said on Tuesday.
Buzzard is closely watched by oil traders worldwide as it is the biggest contributor to the Forties oil stream, the largest of the four physical crude grades that underpin the Brent benchmark.
EU officials proposed sanctions on Tuesday to starve Russian companies of cash as punishment for Moscow’s role in Ukraine, where rebels said they were storming a key airport.
Russia’s oil output rose 1% to 10.52 million bpd in August, showing that energy supplies so far have not been affected by sanctions over the country’s military invasion of Ukraine.