Oil edged higher in Asia Wednesday after industry data showed a decline in US crude inventories, but prices stayed below $40 a barrel amid ongoing concerns over a supply glut.
US crude dropped below the $40 dollar mark for the first time since April on Tuesday, a day after the commodity sank into a bear market, with oversupply, weak demand and expectations of rising output sending prices tumbling over 20 per cent since June.
But prices got a reprieve Wednesday after industry group American Petroleum Institute reported that US crude inventories and gasoline stockpiles have fallen, signs that the excess stock could be easing.
The US Department of Energy will release the latest official stockpile data later Wednesday.
Official figures released last week showed that at the height of the summer driving season, US gasoline stockpiles were at their highest seasonal level in at least two decades.
At around 0350 GMT, US benchmark West Texas Intermediate for delivery in September was up 25 cents, or 0.63 per cent, to $39.76 and Brent crude for October added 19 cents, or 0.45 per cent, at $41.99 a barrel.
“The (price) decline is not totally unexpected, but the speed and severity of the fall has been a surprise,” Daniel Hynes, senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Sydney told Bloomberg News.
“Disruptions tightened the market during the second quarter and the sustainability of those was always going to be relatively short lived. There are still relatively high inventories but the market is approaching a balance.”
A weaker greenback also prompted buying in the dollar-priced black gold which becomes cheaper to holders of other currencies.
The dollar fell to a six-week low against a basket of currencies on Tuesday due to expectations the Fed would delay raising interest rates after recent soft US economic data, Singapore’s United Overseas Bank said.