Crude for October delivery traded at $70.20 a barrel, up 24 cents, or 0.3%, in early North American electronic trading. Trading remained volatile, with the benchmark contract as far down as $69.51 a barrel earlier.
Crude tumbled 3.8% on Monday to close below $70 for the first session in two weeks.
For the last two or three weeks, oil futures have sold off early in the week, as they did Monday in New York, "apparently in anticipation of inventory figures released on Wednesday," said Charles Perry, president of energy-consulting firm Perry Management.
The American Petroleum Institute and the Energy Information Administration are scheduled to release their weekly petroleum reports late Tuesday afternoon and Wednesday morning, respectively.
Analysts surveyed by Platts expect a decline of 1.9 million barrels in crude stocks for the week ended Aug. 28. They also expect a drop of 1.4 million barrels in gasoline inventories and a decline of 600,000 in distillate stockpiles, which include heating oil and diesel.
Also helping oil Tuesday, two indexes tracking manufacturing activity in China showed expansion during August. China is the world's No. 2 consumer of oil. See related story.
"Crude oil will likely continue to trade alongside the equity markets, but developments across China should have the most impact on direction, at least in the near term," said Brian Niemiec, analyst at Susquehanna Financial Group.Also on energy traders' radar screens, the Organization of Petroleum Exporting Countries is scheduled to hold a meeting on Sept. 9 in Vienna.
Analysts expect the cartel, which accounts for about one third of the world's oil production, to keep its production quota unchanged while pressuring member countries to comply with their current production limits.
OPEC said in an August report that member countries raised July production for a fourth straight month. This lowered OPEC's compliance with mandated output cuts below the 70% mark for the first month since January, according to a MarketWatch calculation. See related story.
In other energy news Tuesday, PetroChina Co. (PTR 111.52, +1.77, +1.61%) and Athabasca Oil Sands Corp. have signed agreements allowing the Chinese energy giant to purchase a 60% working interest in two oil-sands projects in western Canada for the equivalent of $1.7 billion.
