Tuesday, January 27, 2009

Oil reaches for $48

Oil prices rose as much as a dollar, reaching towards $48 a barrel on Tuesday, boosted partly by cold weather in top energy consumer the United States, plus signs OPEC oil supply cuts may have begun to underpin prices.

U.S. light, sweet crude for March delivery rose 72 cents to $46.45 barrel by 6:03 am ET, but had climbed as high as $47.49 a barrel.

U.S. crude has rebounded from below $33 a barrel in the past week.

"People are expecting OPEC to really be serious, and the weather's been cold in the northeast U.S., and here, so we're getting a bit of short-term demand," said Tony Nunan, risk management executive at Tokyo-based Mitsubishi Corp.

"We may have found a short-term bottom but nobody is confident that we're heading further up," he said.

Evidence suggests most of OPEC's members are implementing the group's biggest ever 2.2 million barrel per day (bpd) production cut agreed last month.

Oil has fallen more than $100 from a record peak above $147 a barrel in July last year, depressed by falls in demand as the credit crisis has pushed the global economy towards recession.

U.S. fuel inventories, for example, are building as demand shrinks.

U.S. crude oil stocks are expected to have risen a further 2.7 million barrels last week, the fifth straight week of gains. The figures are due out on Wednesday.

Colder weather is expected to help draw down distillate stocks by 800,000 barrels, according to a Reuters poll. Gasoline stocks are likely to have risen by 1.3 million barrels.

Temperatures in the densely populated U.S. northeast are forecast to be below normal this week.

Oil traders will get an early indication of Wednesday's U.S. government data with the release at 4:30 pm ET on Tuesday of inventory figures from the industry group the American Petroleum Institute, as the API shifts to a new, earlier release schedule.

Cyclone Dominic in Australia shut in more than 200,000 barrels per day (bpd) of oil production provided a small measure of support to prices. But output was expected to resume as soon as Wednesday as the storm passes.

Later on Tuesday, U.S. President Barack Obama goes to Capitol Hill to campaign for an $825 billion economic stimulus package to be put to a House vote within days.

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