World oil prices rebounded Thursday on reports that OPEC kingpin Saudi Arabia cut its oil supplies last month, dealers said.
Brent North Sea crude for December advanced $1.77 to $86.48 a barrel in late afternoon deals in London.
US benchmark West Texas Intermediate for December delivery gained $1.34 to $81.86 a barrel compared with Wednesday’s close.
“Oil prices saw a strong turnaround today on the news Saudi Arabia cut its crude supply to the market in September, and signs from China and Germany that the global growth situation maybe not as gloomy as expected,” said CMC Markets analyst Jasper Lawler.
The market also bounced back after sharp losses the previous day that were sparked by surging crude stockpiles in the United States.
“The ongoing large builds in crude oil inventories continue to dominate the oil market, setting a bearish tone and weighing heavily on market sentiment,” said Sucden analyst Myrto Sokou.
“The bearish oil fundamentals verify the slowdown in the US oil demand, following the recent tepid US macroeconomic data.”
The oil market won further support on Thursday after news that China’s key manufacturing sector picked up slightly, but analysts said prices remain burdened by a supply glut.
Crude futures had fallen Wednesday as US stockpiles surged again, with WTI falling nearly $2 a barrel to its lowest closing level since June 2012.
The US Department of Energy (DoE) reported Wednesday that American oil inventories surged by 7.1 million barrels in the week to October 17, more than double market expectations.
US stocks of distillates, including heating fuel, rose by one million barrels, confounding forecasts for a drop of 1.5 million barrels.
Reserves of gasoline meanwhile dipped 1.3 million barrels, broadly in line with expectations.
“The main culprit was undoubtedly the weekly inventories data released by the US Department of Energy,” said Capital Spreads dealer Jonathan Sudaria in reference to Wednesday’s selloff.
“On top of that, the US dollar strengthened which exacerbated the selloff. ”
The stronger greenback makes dollar-denominated oil more expensive for buyers using weaker currencies, which tends to weigh on oil demand and prices.
Meanwhile, British banking giant HSBC said Thursday its preliminary purchasing managers index of manufacturing activity (PMI) for China showed a slight uptick.
HSBC said its PMI reading hit 50.4 in October, up from 50.2 in September, indicating activity is picking up and soothing some concerns about the world’s number two economy.
Anything above 50 indicates growth and a figure below points to contraction.
The result comes days after Beijing released data showing the economy grew at its slowest pace since the start of 2009.
China is the world’s biggest energy consuming nation, while the United States is the number one consumer of crude oil.