Oil erases earlier losses on U.S. data

Oil rebounded on Tuesday and erased earlier losses after U.S. economic indicators generally met expectations and supported prices on increased demand speculations. WTI rose back above $98 a barrel and Brent surpassed the $106 mark.

On the New York Mercantile Exchange, WTI crude futures for August delivery rose to $98.39 a barrel at 13:44 GMT, up 0.36% on the day. WTI hovered around the $98 mark through the day and reached daily high and low at $98.67 and $97.66 per barrel respectively.

Meanwhile, Brent oil for August delivery traded at $106.00 per barrel at 13:36 GMT, up 0.50% for the day. The European benchmark fluctuated between days low at $105.13 and high of $106.20 per barrel.

Oil prices were supported by positive U.S. data that was published at 12:30 GMT. Consumer Price Index for May on annual basis met expectations at 1.4%, compared to 1.1% for the preceding month. On monthly basis, CPI mismatched projections of 0.2% and stood at 0.1%, which however was still well above Aprils 0.4% decline. Core Consumer Price Index met estimates on both annual and monthly basis. The Housing Starts indicator was below forecasts of 0.950 million gain, but standing at 0.914 million it outperformed Aprils 0.856 million reading. Data showing an increase in consumer prices and overall positive outlook in the housing sector improved sentiment on oil demand, thus driving prices up.

Meanwhile investors remain cautions over tomorrows FOMC meeting and Ben Bernankes statement. Analysts are expecting a slow scale back to be announced at this or at some of the next FOMC meetings, which would push dollar-priced commodities down.

Geopolitical unrest in Syria is still spurring concern of spreading into neighbor oil producing countries, while election results in Iran limited oil prices as Hasan Rowhani is seen as the least offensive and open to new conversations with U.S. regarding the country’s nuclear program and the sanctions laid upon Iran.

Also, the American Petroleum Institutes crude reserves report is scheduled for later today. It should bring some preliminary information on U.S. oil stockpiles ahead if tomorrows more reliable EIA report at 12:30 GMT. According to a Bloomberg survey, U.S. Crude Oil Inventories probably fell 500 000 barrels last week amid increased demand during the driving season. Gasoline stockpiles are expected to have increased by 500 000 barrels during the week ending June 14 and distillate-fuel inventories might have jumped by 925 000 barrels. Refineries are expected to have operated at 88% percent capacity, 0.5% higher than the preceding week.