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Brent crude futures climbed $1.47, or 2.1%, to $73.31 a barrel
by 1034 GMT. U.S. West Texas Intermediate (WTI) crude was at
$68.32 a barrel, up $1.20, or 1.8%.
Equities, which often trade in tandem with oil, also rose.
Brent's six-month backwardation, a market structure whereby
shorter-dated futures trade above longer-dated ones, has fallen
to its lowest since March at around $1.30, indicating faltering
market confidence in demand outstripping supply over the year.
"For market participants to start building up long positions
again, they likely need to see larger inventory declines," said
UBS strategist Giovanni Staunovo, adding he expected this to
happen within weeks.
Both benchmarks fell around $3 a barrel on Monday after analysts
highlighted rising global supplies and concerns about demand
growth just ahead of U.S. inflation data due at 1230 GMT and a
U.S. Fed monetary policy meeting concluding on Wednesday.
Most market participants expect the Fed to leave interest rates
unchanged. The Fed's rate hikes have strengthened the greenback,
making dollar-denominated commodities more expensive for holders
of other currencies weighing on oil prices, so a rate hike pause
could be bullish.
Elsewhere, the European Central Bank is expected to hike
interest rates by another quarter percentage point on Thursday
while the Bank of Japan is expected to maintain its ultra-loose
policy on Friday.
In China, disappointing economic data last week raised concerns
about demand growth in the world's largest crude importer. Its
central bank lowered a short-term lending rate on Tuesday to
restore market confidence.
Demand jitters offset a temporary boost in oil prices from Saudi
Arabia's pledge to cut more production in July.
Oil demand outlooks from Organization of Petroleum Exporting
Countries (OPEC) due at 1120 GMT and the International Energy
Agency (IEA) due on Wednesday will provide further trading cues.
(Additional reporting by Yuka Obayashi in Tokyo and Emily Chow
in Singapore; Editing by Conor Humphries, Kirsten Donovan)
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