Demand worries overshadowed a drop in crude stocks after the Energy Information Administration (EIA) seemed to suggest refiners going into maintenance and a weakening demand for gasoline helped send the market higher.
The day after crude oil prices rose almost 5% the dogma of the dollar versus oil inverse relationship has come to a screeching halt ahead of the most exciting FOMC meetings in a decade. As the Fed moves closer to raising interest rates and getting closer to a normalization of interest rate policy the correlation between the dollar and oil is breaking down.
Crude oil posted its biggest 3-day rally since 1990 and put futures back in bull market territory based on a report that U.S. oil production may be falling faster than previously reported, and OPEC is willing to talk with non-Opec oil producers to try to establish a "fair price for oil."
Crude oil prices are out of the crisis zone, trading back above $40 a barrel and if it closes above there, it may show that the world may not be falling apart. A combination of the strongest rally on Wall Street since 2011 and a rally in China overnight, on some alleged government stock buying, is setting the stage for a possible bottom in oil.
Crude oil stabilized on Wednesday after China moved to support the country's economy and stronger than expected U.S. durable goods data was released, but prices stayed near 6-1/2-year lows as a heavy supply glut kept market outlook bearish.