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Oil rebounds in Asia on bargain hunting

Oil rebounded in Asian trade on Thursday on bargain hunting following a recent sharp fall, but analysts said prices would continue to be weighed down by signs of weaker demand.

New York’s main contract, light sweet crude for delivery in June was up 11 cents to $91.14 a barrel and Brent North Sea crude for June delivery added 20 cents to $100.15 in mid-morning trade.

Both contracts declined by over $2.40 a barrel on Wednesday on fresh signs of economic weakness in the United States and China.

A US oil inventory report on Wednesday showed crude stocks increasing by 6.7 million barrels for the week ending April 26, well above the 800,000 barrels forecast by analysts.

This brought inventory stocks to a 395.3 million total, the highest weekly inventory figure since the US Energy Information Administration began collecting the data in 1982.

A rise in inventory stocks indicates weak energy demand and puts a downward pressure on prices.

US manufacturing activity also slowed in April, according to a report by the Institute for Supply Management released Wednesday.

The ISM manufacturing purchasing managers index (PMI) fell to 50.7 in April from 51.3 in March, not much above the 50-point line that separates growth and contraction.

China earlier Wednesday reported a fall in manufacturing activity, with official data showing Chinese PMI dipping to 50.6 in April from 50.9 in March.

Developments in the United States and China, the world’s largest crude consumers, are closely watched as they affect global oil prices.

Ric Spooner, chief market analyst at CMC Markets in Sydney, said the oil market remains concerned over “a picture being painted of moderate demand and fast-building inventories of crude supply”.