Oil inched up as technical gauges signaled that crude’s plunge to a three-month low on Wednesday was overdone.

West Texas Intermediate rose 0.5 per cent to settle just below US$76 a barrel after a $5 slump in the last two sessions pushed futures into oversold territory on their relative strength index. Prices gained early in the session after a U.S. jobless claims report indicated a cooling labour market that could prompt the U.S. Federal Reserve to ease monetary policy.

The advance faded in the afternoon after Fed Chair Jerome Powell said the U.S. central bank won’t hesitate to tighten policy further if appropriate.

Saudi Arabia’s energy minister on Thursday said oil consumption remains healthy and blamed speculators for the recent drop in prices. Earlier this year, the kingdom also criticized crude traders for pushing down prices and warned those who shorted oil to “watch out.” Markets interpreted the warning as a signal that the production cartel leader would consider another output cut, which it eventually did.

“We see no indication that the Saudi Energy Minister is prepared to throw in the towel and return to a market-share maximization strategy at this stage,” Helima Croft, head of commodity strategy at RBC Capital Markets, wrote in a note to clients. “The relevant question may be whether he will look to do another short squeeze if current trends continue.”

Prices were briefly bolstered by headlines that the Israeli army identified several mortar shells fired from Lebanon. The White House said Israel will begin daily four-hour pauses in its military campaign against Hamas to allow civilians trapped in northern Gaza to flee south.

Still, oil prices have tumbled sharply over the past three weeks. Hedge fund manager Pierre Andurand pointed to larger-than-expected supplies — citing high production in the U.S. and Iran — as the catalyst for crude’s recent retreat. Citigroup Inc. says prices are likely to consolidate near current levels as the risk of supply disruption in the Middle East is countered by a weaker market next year.

On the demand side, diesel futures trading in New York have fallen more than 20 cents a gallon, or 7.9 per cent, in the past three sessions to the lowest since July. Diesel has declined faster than crude in recent months, hurting refiners’ bottom lines. Data from China showed Asia’s largest economy returned to deflation in October.

Meanwhile, the front-month WTI spread flipped to contango for the first time since July, taking on a bearish structure where shorter-dated contracts trade at a discount to longer-dated ones. The shift in the futures curve signals that markets are less concerned about supply scarcity than in previous weeks.

Prices:

• WTI for December delivery rose 41 cents to settle at $75.74 a barrel in New York.
• Brent for January settlement climbed 47 cents to settle at $80.01 a barrel.