Oil prices rebound on less than expected build in stocks

Oil futures rebounded in Asian trade on Wednesday, buoyed by a less than expected build in crude oil stockpiles last week and a weakening dollar, but concern that a two-month rally was fading in an oversupplied market capped gains.

A report by industry group the American Petroleum Institute late Tuesday said U.S. crude stocks likely rose last week by 2.6 million barrels to 534.4 million barrels, which would be a new record high for a seventh straight week, but less than analysts’ expectations of a 3.3 million barrel build.

Brent futures LCOc1 climbed 49 cents to $39.63 a barrel as of 0712 GMT after settling down $1.13 in the previous session.

U.S. crude CLc1 rose 61 cents to $38.89 a barrel after ending the previous session down $1.11.

Oil prices fell about 3 percent in the previous session after Kuwait and Saudi Arabia said they would resume production at the jointly operated 300,000-barrel-per-day Khafji field even as major oil producers are considering agreeing on an output freeze.

“There’s a little bit of steadying in oil prices in the Asian time zone. The predominant attitude is one of wait-and-see until the Energy Information Administration (inventory) figures come out,” said Ric Spooner, chief market analyst at Sydney’s CMC Markets.

The EIA is due to release official crude inventory data later on Wednesday. [EIA/S]

Dovish comments on possible interest rate rises by U.S. Fed Chair Janet Yellen on Tuesday had created uncertainty in the market about the outlook for the U.S. economy, said Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance.

“Dovish tones should be good for oil markets but this is the third time it hasn’t been. I’m of the opinion dovishness means we’ve got problems and the economy isn’t doing what it should be doing,” Barratt said.

“I would like to see economies consume more but economies aren’t responding,” he added.

The dollar index .DXY fell on Wednesday after slipping to an eight-day low in the previous session. A weaker dollar makes greenback-denominated commodities cheaper for holders of other currencies.

OPEC member Iran is expected to attend an oil producers meeting in Doha on April 17 to discuss the freeze on global oil production, although it may not take part in the discussions, a source familiar with Iranian thinking said on Tuesday.