Oil prices trim gains after US energy report
World oil prices pared gains on Wednesday as traders absorbed a far larger-than-expected jump in crude inventories in the United States, the world's biggest energy consuming nation, traders said.
New York's main contract, light sweet crude for delivery in March, was up by just four cents to $86.23 a barrel, having earlier risen close to $87.
London's Brent North Sea crude for March added $1.35 to $96.60 in late afternoon deals as traders also awaited the outcome of the Federal Reserve's latest interest rate meeting.
The US government's Department of Energy (DoE) said American crude oil inventories jumped 4.8 million barrels in the week ending January 21.
That was the largest weekly increase in the past three months and signalled weaker demand for energy.
Expectations had been for a smaller gain of 900,000 barrels, according to analysts polled by Dow Jones Newswires.
The DoE added that US gasoline (petrol) stockpiles jumped by 2.4 million barrels last week.
"There is a lot of oil out there," said PFG Best oil analyst Phil Flynn.
"Everybody talks about improving demand, which it true, but we are better prepared to meet rising demand."
Prior to the energy report, oil prices had risen in early trade.
"Prices rebounded, supported by improved optimism on US economic conditions after President Obama proposed cutting the corporate tax rate as well as scrapping (tax) loopholes," said Sucden analyst Myrto Sokou.
US President Barack Obama called on Tuesday for a freeze in federal discretionary spending in his State of the Union speech.
He also vowed sweeping reforms to government but insisted lawmakers should wield a scalpel rather than an axe when tackling spending.
Oil sank on Tuesday in the wake of disappointing economic data in the US and Britain which stirred fears of slowing energy demand.
Traders also digested news that US home prices dropped in November for the fifth straight month, according to the Standard & Poor's/Case-Shiller index.
Prices also fell on Monday after OPEC kingpin Saudi Arabia said the cartel may raise output to meet an increase in demand this year, with average oil prices expected to be around last year's level of $80 despite a recent spike towards $100.
After flirting with $100 a barrel earlier this month, oil has since pulled back amid jitters over the strength of global energy demand.
© 2011 AFP