Oil rose for the first time in seven days in New York after China pledged to boost the nation's economy and Goldman Sachs Group Inc said the balance between supply and demand of crude is tightening.
West Texas Intermediate futures gained as much as 0.8 per cent after settling at the lowest level in almost seven months on May 18. The extent of oil's decline was unwarranted, Goldman said in a report. China will focus more on bolstering economic growth, the official Xinhua News Agency reported on Sunday, citing Premier Wen Jiabao. Crude's relative strength index remained below 30, signalling it may be oversold.
"Chinese growth continues to be sustained and robust," Christopher Bellew, senior broker at Jefferies Bache Ltd. in London, said.
"The emphasis for oil prices is ultimately where demand is growing the most strongly, such as China and India. Prices seem to have found a bottom at last."Crude for June delivery rose as much as 72 cents to $92.20 (Dh338.66) a barrel in electronic trading on the New York Mercantile Exchange and was at $91.84 at 12.29pm London time. It fell 1.2 per cent on May 18 to $91.48, the lowest close since October 26 and expired yesterday. The more-active July contract climbed 36 cents to $92.16. Prices are 7 per cent lower this year.
Brent oil for July settlement rose 78 cents, or 0.7 per cent, to $107.92 a barrel on the London-based ICE Futures Europe exchange.
The front-month European benchmark contract was at a premium to West Texas Intermediate of $15.78. Last week, the gap narrowed 4.9 per cent with the activation of a pipeline that may ease a glut in US crude inventories.
Enterprise Products Partners LP and Enbridge Inc. started shipping oil on May 19 through the 150,000 barrel-a-day Seaway pipeline from Cushing, Oklahoma, to Houston-area refineries, the companies said.
"Despite concerns over the softening economic data, oil demand continues to improve," David Greely, head of energy research at Goldman Sachs in New York, said in the e-mailed report.
"The supply of oil actually available to the market is increasingly constrained by the inability of Iran to market its oil owing to the effects of US and European sanctions."
Brent, the benchmark price for more than half the world's petroleum, has dropped about 3 per cent since May 13, when Saudi Arabia's Oil Minister Ali Al Nuaimi said it should fall to $100 a barrel because global supply is outweighing demand.
Prices slid earlier after Saudi Arabia's output in March climbed to the second-highest level in at least 31 years before a European embargo on Iran that starts in July.