Oil prices rose on Thursday as hopes that the White House would move quickly on an economic stimulus package outweighed flagging demand and rising inventories in the world's top consumers. US crude settled 12 cents higher at $43.67 a barrel, after falling as low as $40.41 earlier. London Brent settled at $45.39 a barrel, up 37 cents.
Earlier in the day, crude prices had dropped after a US government report showed that crude oil, gasoline and distillate fuels rose last week as demand for fuels weakened again. The US stock market pared early losses after a spokesman said President Obama's administration is committed to moving as quickly as possible on an economic stimulus plan.
"Crude is still resilient, despite the big build you have seen in the EIA data. I have a feeling that there will soon be a rebound in the stock market and that will spill over to the energy markets," said Mark Waggoner, president of Excel Futures in Huntington Beach, California.
"In the last week, I've seen investor confidence improving, with the new Obama administration now installed ... I feel that if this confidence continues, it will spill into more (consumer) buying and that will improve demand for gasoline and other energy products," he added. Oil fell in early trade after US Energy Information Administration data showed that crude oil inventories jumped 6.1 million barrels last week, well above expectations for a build of 1.4 million barrels.
Gasoline stocks climbed to 6.5 million barrels, while distillate stocks rose unexpectedly by 800,000 barrels. "Demand continues to be incredibly weak. Industrial demand and trucking demand (for diesel) is extremely weak," said Antoine Halff, first vice president of research at Newedge Group in New York, noting reports of low import and export activity on the US West Coast.
"There is increasing evidence of a collapse of not only domestic industrial manufacturing activity but also in US foreign trade." Oil prices have tumbled from record highs over $147 a barrel hit in July as the economic crisis hits global demand. Economic data showed new claims for US jobless benefits exceeded analyst expectations while home-building slid to a record low in December.China's economic growth slumped to 6.8 percent last quarter, dragging down the pace of expansion for all of 2008 to a seven-year low of 9.0 percent as the full force of the global financial crisis struck home. Apparent oil demand in the No 2 consumer fell for a second month in December as refiners cut production by the steepest rate in seven and a half years on weaker consumption and stockpiles grew.