Oil prices up despite glut in stocks

29 January 2009

Despite a sharp rise in crude stocks, Oil prices rose on Wednesday after US government data showed draws in gasoline and distillate inventories, and OPEC vowed to fully implement its steep supply cuts by the end of the month.

US crude CLc1 settled at $42.16 a barrel, up 58 cents, after plunging nine per cent on Tuesday as bleak US economic data raised concerns about lack of demand. London Brent LCOc1 settled at $44.90, up $1.17.

Oil prices climbed after data released by the US Energy Information Administration (EIA) showed a 1-million-barrel draw in distillate stocks last week as cold weather hit the US Northeast, the world's top heating oil market, and a surprise 100,000 barrel fall in gasoline supplies.

At the same time, crude stocks rose to 6.2 million barrels as refineries facing weak fuel demand slowed operations. "Another flood of crude. We are getting overwhelmed by crude," Phil Flynn, an analyst at Alaron Trading in Chicago, told Reuters.

Crude stocks in the US have risen more than 44 million barrels in the past four months, the biggest four-month increase since 1990, according to EIA data, as refiners put oil in storage instead of into processing units.

Oil prices also recieved a boost from remarks by OPEC secretary-general Abdullah al-Badri at the World Economic Forum in Davos, Switzerland, that even an oil price of $50 a barrel was too low to encourage investment in new supply.