Oil's sharp sell-off paused yesterday as the impact of a surprise announcement of emergency fuel stocks from consumer nations faded.
Brent crude futures eased 54 cents to $106.72 a barrel by 1308 GMT, while US crude futures recovered 24 cents to $91.26.
Brent fell around 6 per cent on Thursday after consumer watchdog the International Energy Agency (IEA) announced the release of 60 million barrels of government-held stocks over the next 30 days.
The extra oil — only the third emergency release in the IEA's 37-year history — will increase global supply by some 2.5 per cent for the next month.
Leading commodities banks JP Morgan and Goldman Sachs cut their oil price forecasts following Thursday's IEA announcement, but Bank of America Merrill Lynch kept its forecast for the second half unchanged at $102 a barrel.
The biggest impact on Thursday was on the spreads between futures contracts as the market reacted to extra availability of crude for immediate delivery — eliminating the premium for spot barrels versus crude for delivery at the end of the year. Other analysts and investors said physical oil could be offered at discounts, piling further pressure on the international market, although they said there was uncertainty about the longer term implications.
Meanwhile, Saudi Arabia, the world's leading exporter, has yet to make any comment on the release. After the Organisation of Petroleum Exporting Countries last month collapsed in disarray without reaching a supply deal, Saudi Arabia had pledged to produce whatever the market needed.
"Saudi Arabia will be crucial — will it stick to its promise to increase its output to 10 million barrels a day or not?" asked Carsten Fritsch, an analyst at Commerzbank in Frankfurt. "If they don't, then the IEA decision will have backfired. Maybe they will scale back production in July."