OIL FUTURES: Crude Tad Higher As Equities Bounce Back, Dollar Eases

Crude-oil futures rose in Asian trading Tuesday, as regional shares rebounded following cues from Wall Street and the U.S. dollar retreated a tad

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The move higher was supported by comments from the Organization of Petroleum Exporting Countries Monday, which hinted that some members could reduce production as a slowing global economy dents oil demand and Libyan crude exports resume more rapidly than expected.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in October traded at $88.84 a barrel at 0649 GMT, up $0.65 in the Globex electronic session. October Brent crude on London’s ICE Futures exchange rose $0.63 to $112.88 a barrel.

Gains were limited as traders remained cautious amid the unfolding euro-zone debt crisis and its implications for the region’s oil demand and for the euro. A weaker euro would make dollar-denominated oil more costly for buyers holding the common currency.

Despite the overhang of a slowdown in the U.S. economy and euro-zone debt jitters, analysts said crude market fundamentals remain robust. While the price of oil may have fallen, the Brent crude market structure has actually strengthened over the last few weeks.

Front-month October Brent was trading at a premium of around $2.15 a barrel to the November contract–a phenomenon called backwardation where near-term prices are higher than later months because of a tight demand-supply balance in the immediate future.

“Crude markets continue to exhibit extreme tightness…arguably it is the continuation of disruption in the periphery of the European market that is the main factor driving a tighter market balance,” JP Morgan analysts said in a note to clients.

Libya is still viewed in the oil market with a lot of uncertainty as rebel fighters try to dislodge Col. Moammar Gadhafi’s loyalists from their strongholds. While the Transitional National Council appears to resuming some oil production, an attack at a rebel checkpoint near the refinery complex of Ras Lanuf in eastern Libya Monday shows the task won’t be easy.

Despite the vulnerability of supply, the current economic cloud could adjust demand to balance the market, the JP Morgan analysts said. This, “and the fact that spot prices are not moving materially higher, ties in with our core assumption that the current level of peak stress from Libya will ease towards the end of the year.”

Nymex reformulated gasoline blendstock for October–the benchmark gasoline contract–rose 137 points to $2.7519 a gallon, while October heating oil traded at $2.9546, 71 points higher.

ICE gasoil for October changed hands at $929.75 a metric ton, down $3.50 from Monday’s settlement.