LONDON: World oil prices bounced into slender gains on Monday, reversing earlier heavy losses as traders eyed improving risk sentiment, dealers said.
Investors were awaiting a speech later in the day by Federal Reserve governor Lael Brainard, whose address will be the last by a bank official before a two-day policy meeting next week.
Around 1600 GMT, US benchmark West Texas Intermediate (WTI) for delivery in October rose 35 cents to $46.23 per barrel, recovering from earlier sharp falls.
Brent North Sea crude for November delivery added 23 cents to $48.24 compared with the close on Friday.
Prices had plunged in earlier deals, mirroring global stock markets, with sentiment pummelled by the prospect of a potential September US interest rate hike.
However, the oil market erased losses in late afternoon London trade as investors became more willing to take risk, in light of a light rebound in New York equities.
Wall Street stocks pushed narrowly ahead early Monday as buy-the-dip sentiment competed with worries that the Federal Reserve could soon hike interest rates.
“The rebound in oil prices has coincided with … overall improvement in risk appetite,” said analyst Craig Erlam at trading firm Oanda.
“I do not think anything in particular has driven this and it may even be a little premature ahead of Lael Brainard’s comments,” he told AFP.
“The markets responded so strongly to Friday’s Fed comments that we may just be seeing some profit taking on those positions.”
Demand projected to rise
Oil prices had plunged Friday, wiping out the previous day’s rally as analysts said a sharp fall in US inventories last week was likely a one-off caused by import cutbacks as Hurricane Hermine ploughed through the Gulf of Mexico.
Remarks from two top Fed officials Friday backing a lift in borrowing costs also dragged on the market as the dollar rallied, making crude more expensive for anyone holding weaker currencies.
Meanwhile, news that oil firms had opened up more rigs to drill fuelled expectations US output would increase, at a time when demand is weak and supply remains plentiful. Traders are awaiting a meeting this month of key producer Russia and the Opec exporters club to address a global supply glut and overproduction crisis that has battered prices for the past two years.
However, while there have been soothing words from officials, analysts are sceptical that any deal will be struck at the gathering in Algiers. Opec added Monday that oil production by countries outside the cartel is now expected to rise in 2017, revising its previous expectations of a drop.