Crude Rebounds From 8-Week Low But Remains Weak On Italy Deadlock

Crude oil rebounded on Tuesday in a correctional move following Monday’s losses amid worries over demand growth following Italy’s uncertain elections and China’s downbeat data. With election results due later in the day a political deadlock is likely in Italy.

It seems that no party won enough seats to win a majority in the upper house, the Senate. This will make it harder to pass key legislations on economic reforms, affecting the eurozone’s economic outlook as Italy is the third largest economy in the eurozone.

If Italy`s politicians will fail to form a grand coalition, between Bersani, Mario Monti`s centrists and Berlusconi`s center-right, or form another technocrat government, further elections could be held within a few months .

- Crude is trading as of this writing around the $ 92.40 a barrel level compared with the opening at $92.02.

- The highest for crude as of this writing is at $92.62 and the lowest is at $92.01.

“There`s a possibility that the Italians might be heading back to the polls. In the short term, investors and traders don`t like the uncertainty ”, said Ben Le Brun from OptionsXpress, Sydney.

Oil prices suffered on Monday after China , the world’s second largest oil consumer, showed a slowing manufacturing activity in February, while worries persisted as the automatic spending cuts in the U.S. , the world’s largest oil consumer, are due on Friday.

Markets will be closely watching Fed Chairman Ben Bernanke`s congressional testimony later in the day for clues to the Fed`s bond-buying program amid worries the Federal Reserve could end this program sooner than expected, which could destabilize the economy.

- Brent is trading as of this writing around the $ 113.77 a barrel after falling 0.59%.

But the geopolitical tensions in the Middle East might keep losses limited. U.S., Germany, China, Russia, France and UK will start today talks with Iran in Almaty, Kazakhstan. Major Powers might offer Tehran some sanctions relief if it agrees to curb its nuclear program.

Meanwhile, the U.S. crude oil stockpiles report might weigh on prices. Inventories are expected to climb for the sixth week as imports and production rose. The API survey later today, ahead of the EIA report tomorrow, might show stockpiles rose by 2.3 million barrels.

- Natural gas is trading as of this writing at $ 3.429 per 1,000 cubic feet after rising 0.44%.

- Heating oil is trading at $ 3.0787 a gallon after falling 0.65%.

- Gasoline is trading as of this writing at $ 3.025 a gallon after falling 1.18%.

Key economic data later today include the U.S. house prices, new home sales and consumer confidence for the month of February.