U.S. crude jumped 6 percent on Aug. 28 as a rally in gasoline prices and air raids in Yemen prompted traders to scramble for a second day to cover short positions, while market players also kept an eye on a storm that appeared to be approaching the oil-rich U.S. Gulf.
U.S. crude has gained about 16 percent over two sessions, headed for its first weekly rise since mid-June. If the day's gains stick, it would be the second largest two-day rise in 25 years.
"A severely oversold and shorted oil market is creating a bid for covering in U.S. crude," said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland.
U.S. crude's front-month was up $2.60, or 6.1 percent, at $45.16 a barrel by 11:38 a.m. EDT (1538 GMT). It showed a near 12 percent gain on the week.
Brent, the global benchmark, rose $2.44, or 2.5 percent, to $50 a barrel. It gained 10 percent on the week.
Gasoline prices surged about 5 percent on the day after Phillips 66 unexpectedly shut down a 150,000-barrel-per-day fluid catalytic cracker at its 238,000 bpd refinery in Linden, New Jersey, due to a leak.
In Yemen, warplanes from a Saudi-led coalition killed 10 people in air raids on Aug. 28, local officials said.
Some analysts also attributed U.S. crude's strength to concerns that Tropical Storm Erika was headed toward oil and gas installations in the U.S. Gulf, as visible on the U.S. National Hurricane Center website.
Global oil prices are still at half their value from a year ago thanks to a huge oversupply of fuel and sluggish demand. Worries over China's economy have compounded the falls in recent weeks.
Some analysts said the slump of nearly 30 percent in just two months meant a rebound was due. The rally on Aug. 27 was fed by a stock market rise, strong U.S. growth data and a pipeline outage in Nigeria.
Some traders remained convinced the rally would fizzle and oil prices would head lower again.
"Spreads in U.S. crude yesterday were weaker across the board, even though the spot contract was up 10 percent," Tariq Zahir, an oil bear at Tyche Capital Advisors in Laurel Hollow, New York, said.
"Today, while not weaker, they are also not significantly stronger. This confirms that the spread market doesn't buy this rally."
Recommended Reading
US Drillers Cut Oil, Gas Rigs for Fourth Week in a Row-Baker Hughes
2024-04-12 - The oil and gas rig count, an early indicator of future output, fell by three to 617 in the week to April 12, the lowest since November.
US Gas Rig Count Falls to Lowest Since January 2022
2024-03-22 - The combined oil and gas rig count, an early indicator of future output, fell by five to 624 in the week to March 22.
US Drillers Cut Oil, Gas Rigs for Second Time in Three Weeks
2024-02-16 - Baker Hughes said U.S. oil rigs fell two to 497 this week, while gas rigs were unchanged at 121.
US Drillers Cut Oil, Gas Rigs for Third Week in a Row
2024-04-05 - The oil and gas rig count, an early indicator of future output, fell by one to 620 in the week to April 5, the lowest since early February.
US Drillers Add Oil, Gas Rigs for First Time in Five Weeks
2024-04-19 - The oil and gas rig count, an early indicator of future output, rose by two to 619 in the week to April 19.