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NEW YORK - Oil prices rose slightly on Wednesday as cold US weather and plans to boost emergency reserves in the world's top consumer offset bearish sentiment from a build in commercial inventories.
US crude futures settled 33 cents higher at US$55.37 a barrel, adding to Tuesday's US$2.46 gain. London Brent crude gained 33 cents to US$55.43.
Cold weather finally arrived last week in the US Northeast, the largest heating oil market, but winter fuel demand remained subdued.
US distillate demand over the past four weeks was 4.1 per cent lower than a year ago, the Energy Information Administration said Wednesday. Distillate stocks rose last week by 700,000 barrels, confounding analysts' expectations for an 800,000-barrel decline.
"The distillate build was bearish. I expected a bigger kick up in demand, given that the temperatures have dropped so dramatically in the last week," Tim Evans, analyst at Citigroup Global Markets, said.
Domestic crude stocks rose 700,000 barrels, while petrol inventories climbed 4 million barrels.
"The EIA numbers are obviously negative, but we believe the crude prices will remain between US$50 and US$55," Mike Fitzpatrick, vice president at Fimat USA, said.
Crude jumped 4.7 per cent on Tuesday, the biggest daily gain since November 20, on news the United States will increase its emergency oil reserves by 11 million barrels this spring.
"The impact is that anaemic US oil demand this year, at best around 200 to 300,000 barrels per day growth, just had a 100,000 bpd bump," Deutsche Bank said in a research note.
The Bush administration said it planned to add 11 million barrels to the country's Strategic Petroleum Reserves this spring at a rate of around 100,000 barrels per day.
"The SPR situation is only short-term supportive. That oil is being stored and does not disappear. In the longer term, it will probably help prices to stabilize at a lower level," Andrew Harrington, a resource analyst at ANZ bank, said.
Oil prices have fallen about 12 per cent this month, leaving prices below what the president of the Organization of Petroleum Exporting Countries, Mohammed al-Hamli, considers a reasonable price.
Hamli said on Tuesday a reasonable price for the group's crude basket was around US$55 a barrel. Opec's reference price is usually valued US$5 to US$6 below US crude.
The group has all but ruled out an emergency meeting, as it believes prices will stabilize once the market feels the full effect of its output reduction of 1.7 million bpd.
- REUTERS
