(Recasts with market activity and comments to settlement; adds
U.S. production data and inventory expectations)
By Barani Krishnan
NEW YORK, Sept 12 Oil prices ended nearly 1
percent higher on Monday as a softer dollar and stronger U.S.
equity markets helped crude futures rebound from an early drop
pressured by worries about increased drilling activity for oil
in the United States.
Forecasts that U.S. shale oil production could fall for an
11th straight month in October also supported oil prices,
although gains were capped by expectations that U.S. stockpiles
may have built again last week after a sharp drawdown the
Brent crude settled up 31 cents, or 0.7 percent, at
$48.32 per barrel.
U.S. West Texas Intermediate crude rose 41 cents, or
nearly 1 percent, to settle at $46.29.
While some oil traders bet on more near-term gains, others
were positioning to sell ahead of bearish U.S. government oil
inventory data on Wednesday.
Analyst polled by Reuters forecast a 4.5 million-barrel
build in U.S. crude stockpiles for the last week, after an
unexpected 14.5 million-barrel slump the previous week, the
biggest drop since 1999.
"If we get to $47.50 on WTI, I'm shorting it as it seems to
be a channel top," said Phil Davis, a trader at PSW Investments
in Woodland Park, New Jersey. "Fundamentally, there's little
support for crude despite its attempts to hold to a bottom
channel of $45 on empty OPEC talk of production cuts."
The Organization of the Petroleum Exporting Countries is
meet non-OPEC members at an industry event in Algeria on Sept.
26-28 to discuss a production freeze that few analysts expect
Oil prices were down earlier on Monday, extending Friday's
drop, on data from last week showing U.S. drillers having added
oil rigs for a tenth week in 11 that showed the longest stretch
of builds in the oil rig count since 2011.
The market rebounded after uncertainty over a potential U.S.
Federal Reserve rate hike in September weighed on the dollar
, making greenback-denominated commodities, including
crude, more affordable to holders of the euro and other
currencies. Equity and other risk markets soared.
Notwithstanding Monday's rebound, oil prices are still down
about 5 percent from Sept. 8, partly reversing a 10 percent
rally early this month that took to prices to around $50.
Much of that decline was pressured by the dollar's rally on
speculation that the Fed may resort to a rate hike in September.
"We have shifted to a trading theme in which correlation
between oil and the equities will be tightening appreciably
going forward as U.S. Fed intentions develop closer scrutiny
across a range of asset classes," said Jim Ritterbusch of
Chicago-based oil markets consultancy Ritterbusch & Associates.
(Addtional reporting by Amanda Cooper in LONDON, Henning
Gloystein in SINGAPORE and Osamu Tsukimori in TOKYO; Editing by
Marguerita Choy and David Goodman)