Oil rebounded above $64 a barrel on Thursday as bargain hunting buyers stepped in after a month long rout and a renewed U.S. push for immediate sanctions against Iran revived some concerns over supplies.
U.S. light crude for October delivery was up 58 cents at $64.55 a barrel by 8:24 a.m. after rising 21 cents on Wednesday, snapping a 12 percent, seven session slide, its longest losing streak in three years.
London Brent crude was 55 cents higher at $63.54 a barrel, having dropped to a low of $62.62 on Wednesday a more than $16 fall from its August 8 record high, the steepest retreat since the first Gulf War in 1990/1991.
Oil traders are reeling from the rout, which gathered pace last week as momentum sellers leapt on the back of a decline triggered by growing stocks at the end of the summer season, easing jitters over Iran and a thus far mild storm season.
Dealers are now debating whether the latest gains are a short term bounce or a resumption of the four year rally.
The International Monetary Fund on Thursday raised its price forecast for 2007 to $75.50 a barrel, tieing it with Goldman Sachs for the second most bullish prediction in a Reuters poll. The average forecast is about $64.50 a barrel.
I would view the current price rally as more of a recoil than anything else, said Tobin Gorey, a commodities strategist with Commonwealth Bank of Australia. The possibility remains that the Iran issue could flare up again but I think the market has downgraded its premium pretty well overall.
Concerns over Iran grew on Wednesday after a U.S. official said the world's fourth largest oil exporter should face sanctions now because it was aggressively pursuing atom bombs, although EU allies stressed it was not too late for talks.
The European Union will restart negotiations with Iran on Thursday, aimed at clarifying an offer diplomats said Tehran made at the weekend to suspend uranium enrichment temporarily.
Iranian President Mahmoud Ahmadinejad held out an olive branch, saying he was open to new conditions and that the dispute could be resolved through negotiations.
We are partisan to dialogue and negotiation and we believe that we can resolve the problems in a context of dialogue and of justice together, he said during a visit to Senegal.
Ahmadinejad had always insisted that Iran would not be deterred from its right to nuclear power, which he said was for peaceful purposes, while the U.S. said it was for making weapons.
Dealers cautioned that early day gains could be fleeting prices have risen during Asian trading hours every day this week, only to cut or reverse those gains in European time.
U.S. inventory data released on Wednesday was viewed as lending only marginal support, as the unexpectedly deep 2.9 million barrel draw on crude stocks was offset by a sharp 4.7 million barrel rise in distillates, including heading oil. S]
Underlining the view that supplies are robust, a spate of refinery run cuts across Asia deepened on Thursday as an industry source said Exxon Mobil Corp. had cut output by 8 to 10 percent at its 600,000 barrels per day (bpd) Singpore plant.
External risks still loomed as a three day strike by oil workers in Nigeria stopped shipments from two big export terminals, even though tankers completed loading and sailed from two other ports and authorities expected any outage to be brief.
It's just a blip. Alternative arrangements can keep production going, said Nigeria's top oil official, Edmund Daukoru.
One union leader said he would advocate that the strike be suspended after the government agreed to hold high level consultations to address the security concerns.
In the Atlantic, the season's third hurricane Gordon was upgraded to Category 3 but posed no threat to land, while Tropical Storm Helene formed off Africa, forecasters said.