NEW YORK (Bloomberg) -- Oil rose amid signs that a global surplus is gradually diminishing, even as markets remain oversupplied.

 

Futures climbed as much as 2.4% in New York after slipping 2.5% Monday. BP CEO Bob Dudley, who in February joked that swimming pools might be needed to hold the global oil surplus, said Tuesday markets may re-balance by year-end. U.S. crude stockpiles probably expanded by 1.75 MMbbl last week, according to a Bloomberg survey before an Energy Information Administration report Wednesday.

 

"The market continues to show strength on expectations that North American production will come down," said Gene McGillian, a senior analyst and broker at Tradition Energy in Stamford, Connecticut. "We’re discounting expectations for another week of stock builds."

 

Crude has rebounded after slumping to the lowest since 2003 in February amid signs the global surplus will ease as U.S. output declines. Oil markets are signaling that prices have bottomed, even as growth in demand is forecast to slow this year, according to Christopher Bake, a senior executive at Vitol Group, the world’s largest independent oil trader.

 

Exxon Mobil Corp. was demoted from the top credit rating by Standard & Poor’s for the first time since the Great Depression as the collapse in prices strangled cash flows. The rating was lowered from AAA to AA+, S&P said in a statement on Tuesday.

 

West Texas Intermediate for June delivery rose 85 cents, or 2%, to $43.49/bbl at 10:58 a.m. on the New York Mercantile Exchange. The contract dropped to $42.64 on Monday. Total volume traded was 19% below the 100-day average.

 

Dollar Weakens

 

Brent for June settlement increased 89 cents, or 2%, to $45.37/bbl on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a $1.88 premium to WTI.

 

“Market fundamentals continue to suggest that the combination of robust demand and weak supply growth will move global oil markets closer into balance by the end of the year,” BP’s Dudley said in the company’s first-quarter earnings statement.

 

The dollar weakened toward a 10-month low as investors await policy decisions from the Federal Reserve and Bank of Japan. The Bloomberg Dollar Spot Index fell 0.4%, bolstering investor demand for commodities priced in the currency.

 

U.S. Stockpiles

 

"I think this is mostly U.S. dollar driven," said Clayton Rogers, an energy derivative broker at futures brokerage SCS Commodities Corp. "There isn’t much fundamental news to get excited about aside from BP’s leadership seeing tighter supply-demand heading into year end."

 

The projected gain in nationwide crude supplies will leave stockpiles above 540 MMbbl for the first time since 1929. Gasoline inventories probably dropped 1 MMbbl, according to the survey.

 

Gasoline futures led gains amid falling stockpiles and strong demand. U.S. gasoline consumption, averaged over four weeks, rose 3.9% from a year earlier to 9.39 MMbpd through April 15, EIA data show.