Oil rose on Thursday on short- covering after a hefty increase in US crude oil stocks compounded concerns of a slowing economy in the world's top energy consumer and led to losses of more than $3 over the past two days. US light crude for February delivery was up 26 cents at $91.10 a barrel.
The contract settled down $1.06 at $90.84 on Wednesday, up from an intraday low of $89.26, the lowest in nearly a month, after weekly data showed a larger-than-expected rise in US crude inventories. Prices had tumbled $2.30 on Tuesday on a surprise drop in US retail sales in December and a record quarterly loss at US bank Citigroup Inc London Brent crude for March was up 10 cents at $89.60. "After a $10 loss from the record $100, prices are just going to bounce back on short-covering.
There is no fundamental bullish news and after short-covering, prices will go down again," said Ken Hasegawa of Brokerage Company Newedge. US crude stocks swelled by 4.3 million barrels to 287.1 million barrels last week, the first build in nine weeks, and well above the 600,000 barrels rise forecast, the Energy Information Administration data showed.
Products stocks also rose, with gasoline stocks up 2.2 million barrels for the 10th straight week while distillate stocks, which include heating oil and diesel fuel, rising for the third consecutive week by 1.1 million barrels. In addition, the arrival of US refinery maintenance season is expected to cause a decline in crude usage.
The report showed a drop of 760,000 barrels per day in crude runs at domestic refineries to 15.1 million bpd. Opec officials have hinted that they do not see the need to increase supplies when the organisation meets on February 5. Oil prices are likely to range between $80 and $90 a barrel in the first quarter but are hard to forecast for the remainder of 2008 due to the possible impact of the subprime crisis, Opec's president said on Wednesday.
Chakib Khelil said in a briefing for businessmen in Algiers that if oil inventories recovered in the second quarter of the year, he did not see why Opec should raise output. The International Energy Agency, an adviser to industrial countries, on Wednesday cut its 2008 global demand growth forecast by 130,000 barrels per day to 1.98 million bpd and said it may lower the figure further if a US economic slowdown accelerates.