Oil Rebounds From Seven-Week Low as Slump Is Viewed as Overdone

July 9 (Bloomberg) -- Crude oil rebounded from a seven-week low as some traders took the view that the decline in prices during the longest losing streak this year was overdone.

Oil snapped six days of losses after dropping 4.4 percent to $60.14 a barrel yesterday, the lowest settlement since May 19. Prices have declined 15 percent since June 29.

“Considering the move we had over the last week or so, the market might be ready for a little bit of a bounce,” said Toby Hassall, a Sydney-based analyst with Commodity Warrants Australia Ltd. “It might be getting into oversold territory.”

Crude oil for August delivery gained as much as 54 cents, or 0.9 percent, to $60.68 a barrel on the New York Mercantile Exchange. Oil dropped as low as $60.01 yesterday.

The International Monetary Fund said yesterday a rebound in the global economy next year will be stronger than it forecast in April, suggesting energy demand may recover.

The Washington-based lender said in a revised forecast that the world economy will expand 2.5 percent in 2010, compared with its April projection of 1.9 percent growth. A contraction this year will be 1.4 percent, worse than an April forecast for a 1.3 percent drop, the IMF said.

Crude oil “got very close to $60 and probably attracted a bit of buying support around that level,” said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney.

U.S. oil inventories fell 2.9 million barrels to 347.3 million last week, the lowest since January, an Energy Department report showed yesterday. Refineries operated at 86.8 percent of capacity, down 0.2 percentage point from the previous week, the department said.

Gasoline Supplies

Gasoline stockpiles climbed 1.9 million barrels to 213.1 million in the week ended July 3, more than twice the increase forecast in a Bloomberg News survey, the Energy Department said. Inventories of distillate fuel, a category that includes heating oil and diesel, rose to the highest since 1985 as consumption dropped to a 10-year low.

Distillate fuel inventories rose 3.74 million barrels to 158.7 million, the biggest gain since January, the report showed. The increase left supplies last week 30 percent higher than the five-year average for the period.

Gasoline inventories were forecast to increase 900,000 barrels last week, according to the median of 16 responses in a Bloomberg News survey. Supplies of distillate fuel were estimated to rise 1.83 million barrels.

Total U.S. daily fuel demand averaged 18.4 million barrels in the past four weeks, down 5.9 percent from a year earlier, the report showed. Distillate consumption fell 12 percent to 3.27 million over the period, the lowest since July 1999.

Gasoline for August delivery rose 1.52 cents to $1.6485 a gallon at 9:17 a.m. Sydney time in New York. Yesterday, it declined 9.95 cents, or 5.7 percent, to settle at $1.6333, the lowest settlement since May 6. It was the biggest one-day drop since March 30.

Brent crude for August settlement rose 20 cents, 0.3 percent, to $60.63 a barrel on London’s ICE Futures Europe exchange at 10 a.m. in Sydney. Yesterday, it declined $2.80, or 4.4 percent, to $60.43, the lowest settlement since May 25.