LONDON: Oil climbed towards $102 a barrel on Wednesday as the market bounced off a 16-month low hit in the previous session, although ample supplies and lingering demand worries limited the rally.
A weaker dollar and expectations of a decline in U.S. crude stocks supported oil prices, which on Tuesday had plummeted in reaction to a sharp gain in the dollar and concerns over slowing oil demand growth in China and Europe.
Brent crude was up $1.60 at $101.94 by 1355 GMT after settling at its lowest since May 1, 2013 on Tuesday. U.S. crude traded up $1.26 at $94.14 after settling down $3.08 from Friday's close. Monday was a U.S. holiday.
"You would expect the market to bounce after such a major downward move yesterday," said Tony Machacek, a broker at Jefferies in London. "Fundamentally, the oil market is well supplied and the indications are prices are still in a downtrend."
The dollar slipped against a basket of currencies. The currency on Tuesday rose to its highest since July 2013, pressuring oil prices as a firmer dollar makes oil more expensive for holders of other currencies.
Investors have mostly discounted threats to supplies from conflict in the Middle East and north Africa, focusing instead on the lack of further disruption to oil flows in Iraq and rising output in Libya.
Nonetheless, that backdrop argues against further downside, say some analysts. Brent has so far stayed above $100 - the price level favoured by Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries.
"Brent could well pause, seeking to consolidate near $100," said Andrey Kryuchenkov of VTB Capital in London. "Given the geopolitical background, any sustained pullback below $100 is unlikely in nervous trading in the very near term."
Brent briefly edged lower after Ukraine said its president had agreed with Russia's Vladimir Putin on steps towards a "ceasefire regime" in Kiev's conflict with pro-Russian rebels.
But the Kremlin denied any actual truce deal, sowing confusion on the eve of a NATO summit.
The latest U.S. inventory reports are expected to show crude and refined fuel stocks dropped last week, according to a Reuters survey, potentially supporting prices.
Industry group the American Petroleum Institute issues its report at 2030 GMT and the more closely watched update from the government's Energy Information Administration is due on Thursday - both delayed by a day due to Monday's holiday.
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