Brent crude oil prices pared gains after rising more than 5 percent on Tuesday as investors viewed bullish Chinese oil demand data as a buying trigger, but contracts remained near 12-year lows as the IEA said the market should stay oversupplied this year.
Brent crude futures, the global benchmark, posted their strongest daily gains in four months, before easing back to trade up 66 cents, or 2.3 percent, at $29.21 a barrel by 11:10 a.m. EDT (1610 GMT). U.S. crude futures were down 32 cents at $29.10 a barrel, after earlier reverting to a discount to Brent prices.
The February U.S. crude contract expires on Wednesday. The March contract was trading at $30.22 per barrel.
“It seems to be a healthy upside correction in an otherwise downtrending market,” said Tamas Varga, oil analyst at London brokerage PVM Oil Associates.
Traders said prices drew support from strong oil demand in China. Preliminary Reuters calculations based on government figures showed record oil consumption of 10.32 million barrels per day (bpd), up 2.5 percent from 2014, defying slowing growth in the world’s second-largest economy.
But oil prices remained near 12-year lows as a global glut was set to last until at least late 2016, according to the International Energy Agency, which advises industrialised countries on energy policy.