By Virginia Harrison and Simon Kennedy, MarketWatch
LONDON (MarketWatch) — Crude-oil futures bounced off 12-week lows in electronic trading Wednesday, as the U.S. dollar declined and encouraged buying in dollar-priced commodities, ahead of a key oil inventory report.
Light, sweet crude for June delivery CLM11 +1.51% advanced $1.49, or 1.5%, to $98.40 a barrel in electronic trading on the New York Mercantile Exchange during European trading hours.
Oil had earlier closed out the North American session at its lowest level since Feb. 22. See report on U.S. moves in crude oil.
Weak housing data, which helped inflame concerns about U.S. demand levels, contributed to the downward price pressure on Tuesday, while a trade-group report showed a weekly rise in oil supplies.
The American Petroleum Institute (API) inventory report showed crude-oil supplies rose 2.7 million barrels in the week ended May 13. Gasoline stocks declined 676,000 barrels, and stockpiles of distillates were down 2.8 million, the trade group said late Tuesday.
The API data came ahead of the more closely watched Department of Energy report, due later Wednesday.
The Department of Energy figures are expected to show crude inventories rose by 700,000 barrels last week and gasoline inventories grew by 600,000 barrels, according to a poll by Dow Jones Newswires.
Analysts at Barclays Capital said the U.S. remains the focus for the energy market, and supply disruptions caused by flooding along the Mississippi River are likely to pressure stock-builds.
“The recent floods and power outages have created an illusion of severe weakness in underlying demand. While growth rates are slowing down, underlying U.S. oil demand for May is ultimately likely to turn out stronger than the apparent consumption figures show,” the analysts said.
“While the short-term direction of trade could very well be sideways amid heightened volatility, structurally, the risk to the upside outweighs those to the downside,” the analysts said.
The dollar extended weakness during Asian trading hours, which helped renew appetites for energy, as well as other commodities. Read more about the reversal in metals prices.
The dollar index DXY -0.08% , which compares the U.S. unit to a basket of six major currencies, dropped to 75.26, from 75.412 in late North American trading on Tuesday.
