SINGAPORE (Reuters) – Oil erased early losses to rise by one dollar to above $64 on Tuesday, tracking a rebound in Asian stock markets as investors returned to buy beaten-down shares.
Traders work in the oil futures pit on the floor of the New York Merchantile Exchange, October 27, 2008.
The U.S. dollar's easing from an earlier 2- year high against the euro also helped and traders looked ahead to signs that OPEC was actually slashing output by about 5 percent in line with a decision taken last week.
U.S. light crude for December delivery rose $1 or 1.6 percent to $64.22 a barrel by 2:46 a.m. EDT, after touching an early low of $61.75.
London Brent crude gained 31 cents to $61.72 a barrel.
"This is a market driven by sentiment," said Gerard Rigby, an analyst with Fuel First Consulting in Sydney. "It will continue to get direction from the equities markets."
Japan's Nikkei average climbed 6.4 percent, encouraged by a softer yen on Tuesday and after the benchmark briefly broke below 7,000 for the first time in 26 years, taking with it commodities, which have traded largely in line with equities recently.
Japan fought to hold back waves from the financial crisis, restricting investor bets on falling share prices and trying to talk down a rallying yen that has threatens to deepen its economic downturn.
The credit crisis, which began with failing U.S. mortgages, has mushroomed into a worldwide rout as investors dump stocks and commodities, shun higher-risk emerging markets and seek out the safest government bonds and currencies.
Oil prices have dropped by nearly 60 percent from a record above $147 a barrel in July as global economic turmoil dents world fuel consumption, with some analysts saying a fall to $50 a barrel -- widely seen as the cash cost of production for many newer oil projects -- is possible in the short term.
The decision by the Organization of the Petroleum Exporting Countries last week to cut 1.5 million barrels per day of output has done little so far to stem oil's fall.
Asian customers said on Tuesday they had yet to receive notice of the volumes of their Gulf crude oil shipments, with most expecting a 5-percent cut.
"For November, the allocation has been long fixed but we are not sure if they may change it later. For December, it's too early to say," a trader with a North Asian refiner said.
Traders were also looking ahead to U.S. crude oil stocks data, which will likely show an increase for the fifth week in a row last week on higher imports, a preliminary Reuters poll of eight industry analysts showed.
Crude inventories were seen up 1.2 million barrels.
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