Oil halts 5-day slump as US crude supply glut seen easing

Oil snapped a five-day retreat on signs the oversupply in US crude stockpiles is moderating.

Futures rose as much as 1.6 per cent in New York after plunging 6.1 per cent in the past five sessions. US crude supplies shrank through May 15 for a third week, the industry- funded American Petroleum Institute was said to have reported, while a decrease of 1.75 million barrels is forecast in a Bloomberg survey before government data Wednesday. The global surplus will disappear by the end of 2016, an official from Trafigura Beheer BV said.

Oil's recovery from a six-year low in March has faltered near $60 a barrel amid speculation that rising prices will encourage production. The Organization of the Petroleum Exporting Countries (Opec), led by Saudi Arabia, has resisted calls to reduce output, exacerbating global oversupply. US crude inventories have fallen for two weeks after hitting an 85-year high, government data show, indicating the glut might be abating.

"US inventory reports have supported the oil prices of late," Ole Hansen, head of commodity strategy at Copenhagen- based Saxo Bank A/S, said by phone. "The current price level might not be sustainable given Opec output continues to grow and US supply has proven resilient."

West Texas Intermediate for July delivery climbed as much as 91 cents to $58.90 a barrel in electronic trading on the New York Mercantile Exchange and was at $58.45 at 1:25 pm London time. The June contract expired Tuesday after slipping 3.7 per cent to $57.26, the lowest close since April 28. The volume of all futures traded was about 39 per cent below the 100-day average. Prices have gained about 10 per cent this year.

Brent for July settlement rose as much as $1.16, or 1.8 per cent, to $65.18 a barrel on the London-based ICE Futures Europe exchange.