Oil prices rose more than 1% on Tuesday, reversing some of the previous session's 6% tumble, as a US plan to buy oil for the Strategic Petroleum Reserve (SPR) provided some support though wider concerns about weaker future demand growth exerted pressure, reports Reuters.
Brent crude futures climbed 94 cents, or 1.32 per cent to $72.36 a barrel by 1237 GMT, while US West Texas Intermediate crude was 98 cents, or 1.45 per cent, higher at $68.36 a barrel.
On Monday, both contracts fell to their lowest since Oct. 1 after Israel's retaliatory strike on Iran at the weekend bypassed Tehran's oil infrastructure.
With signs that neither country seemed likely to escalate the conflict after the attack, investor concerns about flagging global oil demand growth for this year and next rose to the fore.
Declining oil demand from China, the world's largest crude oil importer, has been a drag on global oil consumption and prices.
Global refining margins are dismal as global oil demand growth remains below average due to sluggish economic activity in China, BP CEO Murray Auchincloss told Reuters.
Demand will return to normal growth rates after Chinese President Xi Jinping introduces new stimulus measures to the economy, Auchincloss added.
"Following Israel's retaliation, event risk has faded, leaving the oil market to face up to macroeconomic realities. China, where industrial profits are slumping, will be front and centre," said Harry Tchilinguirian, group head of research at Onyx Capital Group.
Still, tensions in the Middle East remain high. Iranian Foreign Ministry spokesperson Esmaeil Baghaei said on Monday that Iran will "use all available tools" to respond to Israel's weekend attack.
The US on Monday said it was seeking up to 3 million barrels of oil for the SPR for delivery through May next year, a purchase that would leave the government with little money to buy more until lawmakers approve more funds.
The US announcement introduces a fundamental buyer into a category which at present has been sparsely populated, PVM analyst John Evans said.
However, Tchilinguirian said the barrels are not enough to offset the broader pessimism around oil demand centred in China and Europe.
Crude oil and gasoline stockpiles in the US likely rose last week, while distillate inventories were seen down, a preliminary Reuters poll showed on Monday.
