Oil steadied on Tuesday after the previous session's near 5 percent slide, supported by a rebound in equity markets and expectations for a fifth weekly drop in U.S. crude inventories.
The supply and demand picture for oil remains healthy, some analysts said, a day after crude posted its biggest percentage loss since January 4 as concern about the U.S. economy hit financial and commodity markets.
"We do not see the recent price moves as indicative of any need for a reassessment of oil-market fundamentals, but rather a healthy correction in what remains a very strong market," said Barclays Capital.
U.S. crude rose 15 cents to $72.21 a barrel by 7:15 a.m. EDT. Brent crude gained 55 cents to $71.72.
Sentiment was also stronger in other markets. European shares advanced 1.2 percent and copper rallied amid speculation that the U.S. Federal Reserve could act to reassure investors with an interest rate cut.
In oil, speculators who boosted net long positions, or bets prices will rise, on the New York Mercantile Exchange to a record the previous week have been among the biggest sellers, say traders.
Net speculative long positions stood at 237 million barrels last Friday and investors may have sold the equivalent of about 85 million barrels, according to Goldman Sachs.
A drop in net speculative length to 85 million barrels could knock up to $10 to $12 a barrel from the price of U.S. crude, Goldman said in a research note.
"Further liquidation could cause WTI prices to drop by another $5 a barrel," the bank said.
(Reuters, 07/08/2007)