Oil rebounds from two-week low ahead of government supply data

NEW YORK (Bloomberg) -- Oil rebounded from a two-week low as traders estimated a seasonal gain in U.S. crude inventories has already been priced in.

West Texas Intermediate futures climbed as much as 1.4% after tumbling 2.9% Monday. U.S. supplies probably rose by 3.5 million bbl last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday. Stockpiles have advanced during the month of October in the past five years as some refiners shut operations for maintenance.

"We overdid it to the downside yesterday," Phil Flynn, a senior market analyst at Price Futures Group in Chicago, said by phone. "The expected inventory build is already in the price. This is the time of year when you expect crude supplies to rise."

Oil failed to sustain a gain above $50/bbl earlier this month amid signs the market will remain oversupplied. The Organization of Petroleum Exporting Countries (OPEC) continues to pump more than its quota and Iranian Oil Minister Bijan Namdar Zanganeh has predicted no imminent change in the group’s production strategy. His own government is preparing to boost output once sanctions are removed, he told reporters in Tehran. OPEC will hold technical discussions with several non-members including Russia on Wednesday.

New Lows

WTI for November delivery, which expires Tuesday, rose 51 cents, or 1.1%, to $46.40/bbl at 10:38 a.m. on the New York Mercantile Exchange. The contract fell $1.37 to $45.89 on Monday, the lowest close since Oct. 2. The volume of all futures traded was 20% below the 100-day average. The more active December future rose 56 cents to $46.84.

Brent for December settlement increased 50 cents, or 1%, to $49.11/bbl on London-based ICE Futures Europe. The contract touched $48.25 earlier, the lowest since Oct. 15. The European benchmark crude traded at a $2.27 premium to December WTI.

U.S. Stockpiles

U.S. crude stockpiles probably expanded for a fourth week through Oct. 16, according to the Bloomberg survey. That would be the longest run of gains since April and keep supplies more than 100 million bbl above the five-year seasonal average, according to EIA data.

Iran is pushing to regain global oil sales it lost after the U.S. and other world powers imposed sanctions over its nuclear program. The country can boost exports by 500,000 bpd within a week of the removal of penalties, Roknoddin Javadi, managing director of state-run National Iranian Oil Co., told reporters. Shipments can be increased by 1 MMbpd within six months of the curbs being lifted, he said.

Iran is the fifth-biggest OPEC producer, according to data compiled by Bloomberg. The 12-member group has pumped above its 30 MMbpd quota for the past 16 months.