Oil rebounded from the lowest close in almost two months after U.S. crude inventories declined and as investors speculated that recent losses were excessive.
Futures rose as much as 0.6 percent in New York after falling close to technical-support levels. Prices slid 1.5 percent yesterday, the seventh decline in eight days, over concern that the European debt crisis may worsen and derail the global economy. Spaniards held protests and Greek police fired tear gas when a general strike turned violent. U.S. crude inventories slid 2.45 million barrels to 365.2 million last week, the Energy Department said. Analysts polled by Bloomberg had forecast a gain of 1.9 million barrels.
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"The inventories surprised the market and stabilized prices," Thina Saltvedt, an analyst at Nordea Bank AB, said by telephone from Oslo. "Now it's a waiting game, as the turbulence in Spain and Greece is dampening risk appetite."
Oil for November delivery gained as much as 57 cents to $90.55 a barrel in electronic trading on the New York Mercantile Exchange and was at $90.24 at 10:39 a.m. London time. The contract yesterday fell $1.39 to $89.98, the lowest close since Aug. 2. Prices are down 6.5 percent this month and up 6.2 percent this quarter.
Brent oil for November settlement rose 12 cents, or 0.1 percent, to $110.16 a barrel on the London-based ICE Futures Europe exchange. The European benchmark grade's premium to West Texas Intermediate was at $19.91 after closing yesterday at $20.06, the widest since Aug. 16.
Oil in New York is rebounding after approaching technical support at $88.35 a barrel. That's the 50 percent Fibonacci retracement of the rise to $99 on Sept. 14 from the 2012 low of $77.69 in June. Crude also gained after settling below its lower Bollinger Band at $90.12 a barrel yesterday. The last time it closed below the band on Sept. 20 it increased 1.1 percent the next day. Buy orders tend to be clustered near chart-support levels.
Prices fell yesterday as Spanish protesters marched for a second night in Madrid, calling on Prime Minister Mariano Rajoy to reverse austerity measures as his nine-month-old government prepared its fifth package of budget cuts. The nation's 10-year bond yields rose above 6 percent, approaching the levels seen before European Central Bank President Mario Draghi offered to buy struggling nations' debt.
Schools, hospitals, ferries and government services shut down in Greece yesterday in the first walkout since February. Thousands of protesters streamed into the central Syntagma Square in Athens, opposite the Parliament House. The government is planning an austerity package that Prime Minister Antonis Samaras says is vital to keep the nation in the euro area.
"There is pessimism coming into the market," said Jonathan Barratt, chief executive officer of Barratt's Bulletin, a commodity newsletter in Sydney. "Oil is obviously under pressure as a result of what's happening in Europe."
U.S. total fuel use decreased 1.1 percent to 18.4 million barrels a day, the lowest level since April 6, in the four weeks ended Sept. 21 and crude stockpiles last week were at the highest level for this time of the year since 1990, according to the Energy Department report.
Gasoline inventories dropped 481,000 barrels last week, the Energy Department said. They were projected to gain 500,000 barrels, according to the median estimate of 11 analysts in the survey. Distillate supplies, a category that includes heating oil and diesel, declined 482,000 barrels compared with a forecast 500,000 barrel increase in the survey.
U.S. oil production surged last week to the highest level since January 1997, reducing the country's dependence on imported fuels as new technology unlocks crude trapped in shale formations. Output rose by 3.7 percent to 6.509 million barrels a day in the week ended Sept. 21, the Energy Department said. The nation met 83 percent of its energy needs in the first six months of the year, department data show. Imports have declined 3.2 percent from the same period a year earlier.
--With assistance from Ben Sharples in Melbourne and Ramsey Al- Rikabi in Singapore. Editors: Bruce Stanley, Rachel Graham
To contact the reporter on this story: Jake Rudnitsky in Moscow at jrudnitskybloomberg.net
To contact the editor responsible for this story: Stephen Voss at sevbloomberg.net