Investing.com -- U.S. crude futures rallied sharply on Tuesday afternoon after touching down to fresh six-year lows earlier in the session, as the timing of an imminent rate-hike from the Federal Reserve and continual woes in China remained in focus.
On the New York Mercantile Exchange, WTI crude for October delivery wavered between $41.95 and $43.38 a barrel, before settling at $43.09, up 0.68 or 1.60% on the session. Texas Long Sweet futures are still down approximately 17% over the last month of trading since hovering near $50 a barrel in late-July.
On the Intercontinental Exchange (ICE), brent crude for October delivery traded in a tight range between $48.26 and $49.05 a barrel, before closing at $48.81, up 0.07 or 0.09% for the day. The spread between the international and U.S. benchmarks of crude stood at $5.72, below Monday's level of $6.33 at the close.
Earlier on Tuesday, U.S. crude futures hit its lowest level since 2009 in spite of indications that crude inventories nationwide could decline for a third consecutive week. The American Petroleum Institute (API) will release its weekly inventory on Tuesday after the bell. Separately, Wednesday's government report from the U.S. Energy Information Administration (EIA) could show that U.S. crude stockpiles fell by 1.6 million barrels for the week that ended on August 14.
A week earlier, U.S. crude stockpiles decreased by 1.7 million to 453.6 million, in line with analysts' expectations for a 1.6 million draw. Crude inventories nationwide remain at their highest level at this time of year in at least 80 years. The draw was preceded by a 4.4 million decline for the week ending July 31, as crude production across the U.S. continues to level.
Energy traders continue to monitor fluctuations in the dollar, ahead of Wednesday's release of the minutes from the Federal Open Market Committee's July meeting. Last week, Fed vice chairman Stanley Fischer expressed concern with the lack of inflation in the U.S. economy due to slower than expected growth. The Fed would like to see long-term inflation move toward its targeted goal of 2% before it starts to raise interest rates.
Hours before the Fed minutes are made public on Wednesday afternoon, the U.S. Labor Department's Bureau of Labor Statistics will issue its Consumer Price Index (CPI) report for July. Analysts expect the headline CPI to tick up by 0.2% on a monthly basis, following a strong gain of 0.3% in June.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.
The dollar has also been impacted by seismic shifts in Chinese monetary policy after the People's Bank of China (PBOC) altered its valuation method for the dollar-yuan cross-rate last week. On Tuesday, the PBOC injected the largest amount of cash into its financial system in more than a year and a half in an effort to stem outflows from a weaker yuan. The effort had little impact on Chinese equity markets, as the Shanghai Composite Index plunged 6.2% to 3,748.16, falling more than 25% below its peak from June.
China reportedly imports more than 5.67 million barrels of oil per day, placing it second in the world behind the U.S in the category.