Under normal market conditions, even with shale supply, there should have been a little more support for oil prices above $40 - 50 dollars.
October Brent rose 21 cents, to $51.87 a barrel on the ICE Futures Europe exchange, recouping part of Monday's 2% slump.
"If the downtrend in oil inventories is maintained, then a bullish case can be made for oil, especially given the ongoing supply restrictions from OPEC and Russian Federation", he added. Supply data from the Energy Information Administration will be released Wednesday morning.
"The U.S. oil count fell by 5 oil rigs according to Baker Hughes, confirming talk of a slowdown by many in the oil service space", he said.
Brent crude, the global oil benchmark, rose 3.7% to $US52.92 a barrel, while West Texas Intermediate, the United States crude marker, was up 3.5% at $US48.74 barrel. Distillate product supplied averaged over 4.2 million barrels a day over the past four weeks, up by 14.4% compared with the same period previous year.
After markets closed Tuesday, the American Petroleum Institute said that USA oil inventories fell by 3.6 million barrels in the week ended August 18. Higher prices stem from an OPEC-led initiative to reduce global supplies by 1.8 million a barrel from January 2017 through March next year.
This is happening at a time when the resolve of the participants is weakening, and oil production from Libya, which is exempt from the deal, has been soaring. The report added that Iran is planning to offer new crude oil blends to diversify its customers.
Refinery crude runs fell by 104,000 bpd, as utilization rates fell by 0.7 percentage point to 95.4 percent of total refining capacity, EIA data showed, as the summer driving season nears its end.
Shale dump. BHP Billiton Ltd, after pressure from activist investors, are selling its onshore USA oil-and-gas operations as they have been losing big money in the US shale play.
In the meantime we are starting to see more signs that USA oil output from shale may be peaking.
So far this year, heavy Iranian crude has traded almost 20% above the last year's average of $39.19 a barrel, the reports said.