Oil prices rose over a dollar on Wednesday after Opec vowed to follow through on its agreed record production cuts and US government data showed draws in gasoline and distillate inventories. US crude rose $1.34 a barrel to $42.92 by 1:35 pm EST (1835 GMT), after plunging 9 percent on Tuesday as bleak US economic data stirred demand concerns.
London Brent rose $1.98 to $45.71. Opec Secretary General Abdullah al-Badri told reporters at the World Economic Forum in Davos, Switzerland, that even an oil price of $50 a barrel was too low to encourage investment in new supply and added that the cartel would fully enforce supply curbs by the end or this month.
Opec has agreed to shave some 4.2 million barrels per day of production since September to counter the free-fall in oil prices from record peaks over $147 in July. Oil also drew support from rising equities in Europe and the United States and a weaker US dollar, which makes dollar-denominated commodities more attractive.
Data released by the US Energy Information Administration showed a 1-million-barrel draw in distillate stocks last week as cold weather hit the US Northeast, the world's top heating oil market, and a surprise 100,000 barrel fall in gasoline supplies. "It looks like the products are kind of stabilising the whole complex right now," said Tom Bentz, senior commodity analyst at BNP Paribas Commodity Futures, Inc in New York, New York.
Crude stocks rose sharply, however, up 6.2 million barrels, as refiners facing weak fuel demand slowed operations. "Another flood of crude. We are getting overwhelmed by crude," said Phil Flynn, analyst at Alaron Trading in Chicago. US crude stocks have risen more than 44 million barrels in the past four months, the biggest four-month increase since 1990 according to EIA data, as refiners put oil in storage instead of into processing units.
Traders also were watching for the result of a two-day Federal Reserve meeting due later in the day. Policymakers were expected to hold their target for official borrowing costs in a range of zero to 0.25 percent. On Tuesday, data from the American Petroleum Institute (API) showed crude inventories rose by 800,000 barrels. The EIA data is seen by traders as a more complete snapshot of supplies.
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