Oil prices rebounded from the lowest level in six and a half years, rallying by over 1.6 per cent in the domestic market on Thursday as the sharp tumble in prices on Wednesday when the energy commodity shed more than 4.6 per cent spurred bargain buying in the fuel at existing levels.
Oil has been in reverse gear lately as massive US storage levels and a boost in OPEC output with Iran getting ready to return on the scene stoked fears over a worsening supply glut. A surprise bump of 2.6 million barrels in US crude oil supplies roiled oil in the previous session with total inventories at an 80-year high.
Fears that a worsening rout in Chinese stocks, which slid over 3 per cent on Thursday, may spread to other parts of the world's second biggest economy, darkening the demand outlook for the fuel have also kept the commodity under intense selling pressure.
A pickup in the health of the American economy though came to the rescue of the fuel as firings remained muted, existing home sales jumped to the highest level since February 2007 in July and manufacturing in Philadelphia soared this month, signaling improved demand prospects from the world's biggest oil consumer.
Jobless claims inched up 4,000 to 277,000 last week, remaining near a record low, while previously owned home sales climbed 2 per cent to a 5.59 million annual pace in July and the gauge measuring manufacturing in Philadelphia jumped to 8.3 in August from 5.7 in July, with a reading above 0 signaling expansion.
Investors cast aside data which showed that a leading index for the US economy declined by 0.2 per cent in July from June, when it climbed 0.6 per cent.
Oil may be back in bear terrain today as a worsening China factory slump clouds demand outlook.
At the MCX, Crude oil futures, for the August 2015 contract, closed at Rs 2,754 per barrel, up by 1.62 per cent, after opening at Rs 2,700, against the previous close price of Rs 2,710. It touched an intraday high of Rs 2,762.