The massive jump in the price of oil this week has raised new concerns about the role of speculators and possible market manipulation, but traders say the historic surge had more to do with "stupidity" or poor risk management.
"There could be some improved sentiment but I suspect people are largely being cautious ahead of the release of the EIA data and don't want to be caught short," said David Moore, a commodities analyst at the Commonwealth Bank of Australia.
Distillate stocks are forecast to have fallen by 1.5 million barrels. Gasoline stocks are expected to have dropped by 4 million barrels, the ninth straight week of declines, as Hurricane Ike forced the shut-down of Gulf Coast refineries.
Energy firms continued to work on restarting production, refineries and pipelines after Hurricane Ike battered U.S. oil infrastructure. Six oil refineries in Texas remained shut on Tuesday due to the hurricane.
During the expiry of the October U.S. crude oil contract, oil had its biggest ever one-day gain of nearly $16 a barrel on Monday. The U.S. Commodity Futures Trading Commission is reviewing the price jump to ensure trading was valid.
But prices have fallen back from a record peak of $147.27 a barrel on July 11, pressured partly by falls in demand in the United States, the world's top energy consumer.
Fears the crisis in the financial sector could tip the global economy into recession has also weighed on the market.
These worries have not gone away despite the U.S. government's $700 billion bailout plan.
"Key emerging markets for commodities like China are also seeing strains," said Harry Tchilinguirian, analyst at BNP Paribas.
"China faces a collapse in equity and property markets, which adds further headwinds to its economy on top of slowing demand for its manufactured products by advanced economies," Tchilinguirian said.
Author: Jo Amey
