China cut interest rates on Tuesday and lowered the amount of reserves banks must hold in its latest move to stimulate growth, aiding a recovery in European and Wall Street shares. Brent settled up 52 cents at $43.21 a barrel, after hitting $42.23 on Monday, its lowest since March 2009. "Forty dollars a barrel is not sustainable because only Middle East and some shallow water players can profit at that level," Herve Wilczynski of Houston-based A.T. Kearney's Oil & Gas Practice said, giving a reason for the rebound.
US crude ended the session $1.07 higher at $39.31, advancing from $37.75, its lowest since February 2009 set in the previous session. "We're practically oversold on oil at this moment and we can't keep going down in a straight line," said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow, New York. "That said, I wouldn't hold my breath on a proper recovery yet."
Expectations of another build in US crude stockpiles last week amid refinery outages could pressure the market again, traders and analysts said. A Reuters poll forecast stockpiles rose a million barrels last week, adding to the previous week's 2.6 million-barrel build. Industry group American Petroleum Institute will issue a stockpile report at 4:30 pm EDT (2030 GMT), before Wednesday's official data from the US Energy Information Administration.
US gasoline futures, kept a lid on crude's recovery, tumbling 2 percent to seven-month lows due to the restart of a key Midwest refinery unit and the approaching end of the summer driving season. Some analysts expect further deterioration in China's growth and also a US rate hike by the year-end that could add to the dollar's rally, putting more weight on commodities. "That puts further cracks into the two main growth pillars for the world economy of recent years: Chinese demand (including commodities) and easy money," HSBC's co-head of Asian economics research Frederic Neumann said.