Oil rose 3 per cent towards $39 a barrel today, as OPEC kept up its talk of production cuts and a cold snap in the United States boosted heating oil demand.
Top exporter Saudi Arabia said yesterday it was prepared to go even further than cuts it had made since December if the market warranted it, while OPEC's secretary general said the cartel may reduce oil output again at its meeting in March.
But analysts said downside risks remain high. A US government report due later in the day is expected to show crude oil stocks rising for the third consecutive week, by more than 2 million barrels.
US light crude for February delivery rose $1.11 to $38.89 a barrel by 6.13am. London Brent crude gained 13 cents to $44.96.
"Oil was boosted by US weather and Saudi Arabia's comments in the previous session but the trend is still down, with lower energy demand in focus," said Michelle Kwek, an analyst at Informa Global Markets in Singapore.
"The EIA data due later is also expected to show a build-up in stocks and that will again reflect waning demand in the United States."
US crude oil stocks have swelled as demand in the top oil consumer wilts, pushing US crude futures into a deep discount compared with Brent crude.
A Reuters poll ahead of today's US inventory report saw a 2.2 million-barrel build in crude stockpiles in the week to January 9th, and distillate and gasoline supplies rising by 1.1 million and 1.6 million barrels respectively.
The global financial crisis, the worst since the 1930s, has pushed much of the industrialised world into recession, causing oil demand to slump and crude prices to tumble by more than $100 from its record peak of above $147 a barrel last July.
Reuters