Oil prices rebound on hopes for output cuts, US consumer prices up by most in nine months

Oil prices rebounded on Wednesday on hopes for output cuts after a steep drop a day earlier, while the dollar held losses against a basket of currencies following data showing U.S. inflation increased at a rate in line with expectations.

U.S. energy shares supported the S&P 500 as they rose along with oil prices, which were boosted by the growing prospect of OPEC and allied producers cutting output at a meeting next month to prop up the market.

Wall Street opened higher but had backed off most of its gains in late-morning trade.

U.S. crude rose 2.87 per cent to $57.29 per barrel and Brent was last at $67.49, up 3.09 per cent on the day. The contracts had plunged on Tuesday and benchmark Brent has fallen by over 20 per cent since early October on concern about excess supply and slowing demand.

"The dramatic selling across the oil markets in recent days has come to a brief pause," said Jameel Ahmad, head of market research at futures brokerage FXTM.

U.S. consumer prices increased by the most in nine months in October amid gains in the cost of gasoline and rents, according to data on Wednesday.

The Labor Department said its Consumer Price Index rose 0.3 per cent last month, while excluding the volatile food and energy components, the so-called core CPI climbed 0.2 per cent. Those were in line with forecasts from economists polled by Reuters.

The data could encourage investors about the path of interest rate hikes by the Federal Reserve. The U.S. central bank is widely expected by traders to raise rates at its December meeting, but the number of increases next year is more of a matter of debate.

"You could make the case that because it wasn’t hotter than expected maybe that means the Fed won’t have to be quite as aggressive," said Willie Delwiche, investment strategist at Baird in Milwaukee.

The Dow Jones Industrial Average rose 60.79 points, or 0.24 per cent, to 25,347.28, the S&P 500 gained 7.56 points, or 0.28 per cent, to 2,729.74 and the Nasdaq Composite added 13.18 points, or 0.18 per cent, to 7,214.05.

The pan-European STOXX 600 index lost 0.29 per cent.

European shares hit their lowest in two weeks as data showing the German and Japanese economies contracting in the third quarter fuelled worries about global growth.

MSCI's gauge of stocks across the globe gained 0.20 per cent.

The dollar index fell 0.29 per cent, with the euro up 0.24 per cent to $1.1316.

U.S. benchmark 10-year Treasury yields rallied from two-week lows on Wednesday, bolstered by continued optimism about Britain's exit from the European Union.

Benchmark 10-year notes last fell 4/32 in price to yield 3.1599 per cent, from 3.145 per cent late on Tuesday.

(With inputs from agencies.)