Crude oil is up 4%

Mexico isn't breaking up with US oil refiners, but it sure seems like it wants to see other people.

West Texas Intermediate futures climbed as much as 2.5 per cent. Refinery utilisation rates probably rose by 0.3 percentage points to 87.9 per cent of capacity last week, according to a Bloomberg survey. Industry group the American Petroleum Institute will issue its preliminary inventory data on Tuesday before official numbers on Wednesday from the United States government.

A global economic slowdown led by China has hammered demand for the commodity and highlighted fears there may not be enough economic activity to soak up excess supplies, as output from oil-producing nations remains high. An Energy Information Administration report Wednesday is expected to show that crude stockpiles rose by the smallest amount in six weeks while gasoline supplies fell.

Brent crude futures were down 21c to $48.58 by 9.13am GMT, under pressure from Russian production hitting a post-Soviet peak while China's demand outlook weakened. The Department of Energy's (DoE) statistical arm reported an 8.03 million barrels increase in U.S. crude inventories for the earlier week.

There was a rally in the oil markets overnight, with USA crude futures closing up 3.8% at US$47.90 a barrel. The European benchmark crude traded at a US$2.52 premium to WTI. On Tuesday, it hit its highest since October 13 at $48.36. Global oil supply and demand will begin to move into balance by late 2016 or 2017 and prices may rise to $US70 to $US80 a barrel by the end of the decade, he said in Tokyo on October 30.

One of the few areas of the market that didn't really participate in October's rip-roaring rally - oil and gas stocks - have been perking over the last few days. Also, a strike by Brazil's largest public-sector union is taking a toll on production in that country. Libya's oil produciton will drop by about 70,000 barrels a day to less than 400,000 barrels a day after an export terminal was blocked by an armed militia, according to The Wall Street Journal.