LONDON: US crude oil jumped by more than $1 a barrel ahead of the September contract's expiry on Wednesday, while Brent bounced off a 14-month low to reach $102 as traders bet a 12 percent slide since June was overdone.
U.S. crude oil, also known as West Texas Intermediate or WTI, has been pressured by growing supplies of light-sweet oil from the North American shale boom, hitting a 7-month low of $94.26 on Tuesday.
But WTI for September delivery spiked on Wednesday, jumping by more than $1 a barrel as traders bought back short positions ahead of the contract's expiry later in the day.
It's premium over the contract for October delivery hit more than $3 a barrel, the largest price difference between the front and second month contracts since 2009.
Brent crude for delivery in October was up 46 cents at $102.02 a barrel by 1100 GMT. The contract fell to $101.07 on Tuesday, its lowest since June 26, 2013.
The U.S. crude contract for September delivery, which expires at the close of trading on Wednesday, rose $1.45 to $95.93 a barrel after falling sharply in the previous session.
The more actively-traded October contract rose 29 cents to $93.15, with its discount to Brent around $9, the largest since June.
WTI's move came despite an industry group reporting that stocks at Cushing, Oklahoma - the WTI delivery point - jumped by 1.7 million barrels. Traders said concerns remained about the number of barrels available at the key supply hub.
The more closely-watched government data on oil inventories in the United States is released at 1430 GMT on Wednesday.
ATLANTIC GLUT
Brent, the international benchmark, has fallen by more than $13 a barrel since June as rising supplies of light-sweet crude created a glut in the Atlantic basin. Fears that violence in Iraq would slash output from OPEC's second largest producer have also not materialised.
Output from Libya has also been rising despite fighting between rival militias, with a tanker loading oil at Libya's largest port of Es Sider on Wednesday for the first time since the end of a year-long blockade.
On Tuesday, Libya said total oil production had risen to 562,000 barrels per day (bpd) from lows of barely 100,000 bpd earlier this year, though still well down on pre-blockade levels of near 1.4 million bpd.
Growing supplies and falling prices have raised talk of a possible output cut by the Organization of the Petroluem Exporting Countries (OPEC), which controls about one-third of daily oil supplies.
"The returning oil supply from Libya is flooding a market that is already amply supplied," said Commerzbank analyst Carsten Fritsch
"There is thus growing pressure on the other OPEC producers to scale back their supply so that the oversupply does not become excessive."
Delegates from three OPEC members said on Tuesday the group was expecting higher seasonal demand to support the market in the coming weeks.
While supply worries have eased threats to supplies in the Middle East are also far from resolved.
Islamic State insurgents posted a video on Tuesday purportedly showing the beheading of U.S. journalist James Foley and images of another U.S. journalist whose life they said depended on how the United States acts in Iraq.
The posting of the video followed nearly two weeks of U.S. air strikes that have pounded militant positions and halted the advance of Islamic State.
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