Oil rebounds to over $82 from three-week lows as demand for jet fuel rises

Oil was up over $82 on Tuesday, rebounding from three-week lows on increased demand for jet fuel as European planes took back to the skies with the threat from ash spewed by a volcano in Iceland receding.

Flights from many parts of Europe are set to resume following a deal agreed by the EU to free up airspace closed after the volcano eruption last week. The disruption cut back global jet fuel use by about 20 per cent in the past few days.

US crude for May delivery surged as high as $82.38 and was up 74 cents at $82.19 a barrel by 3:24 pm ET, after Citigroup posted its best results since 2007 on Monday. The results raised investor optimism over corporate earnings and helped allay fears over earnings.

The previous two trading sessions had seen oil fall almost 5 per cent because of the flight ban and the US government action against Goldman Sachs which lessened risk appetite.

According to analysts, the market reacted to the disruptions to air traffic in a knee-jerk fashion, but with flights increasing especially from southern Europe sentiment was again picking up.

They add that though the Goldman Sachs issue had changed the market sentiment the fundamentals remained sound and the overall feeling was that a V-shaped recovery was in the offing and oil demand would rise. They say for people concerned about having missed the rally it was a good time to get back in.