Oil prices higher as volatility grips crude market

[LONDON] Oil prices were higher Thursday after yet more volatile trading, as dealers reacted to further evidence of a supply glut and hints at possible action to reverse the market slide.

At about 1200 GMT, US benchmark West Texas Intermediate for delivery in March was up 11 cents at $32.41 a barrel.

Brent North Sea crude for March grew 36 cents compared with Wednesday's close to stand at $33.46.

Prices slid in earlier Asian trading hours, a day after official data revealed that US commercial crude stockpiles had climbed to a record level, further stoking worries about global oversupplies.

But in what has been an extremely volatile week's trading, oil futures have enjoyed strong gains on hopes of stimulus measures in the eurozone and Japan.

Additional support for prices has come from market talk of a possible meeting of OPEC and non-OPEC oil producers, notably Saudi Arabia and Russia, aimed at limiting supplies of crude to help support a price recovery.

The economy minister of recession-hit Russia on Thursday pledged nearly $10 billion to tackle the country's financial crisis, as the low oil price weighs heavily on growth.

Alexei Ulyukayev earmarked 750 billion rubles (US$9.8 billion) in anti-crisis measures.

The world remains awash with oil supplies, a situation that has been fuelled by Opec's refusal to curb crude output as the cartel's Gulf-state members look to squeeze out US shale producers.

The Saudi-backed strategy is aimed also at pressuring Russia - the biggest global oil producer - and forcing fellow Opec member Iran to trim output as Tehran looks to hike its own production after the lifting of Western sanctions.

Oil markets have been extremely volatile in recent days, soaring late last week from 12-year lows.

However, continuing worries about a supply glut, weak demand and the slowing global economy have returned to the fore.

The US Department of Energy on Wednesday reported that the country's commercial crude inventories last week jumped 8.4 million barrels to 494.9 million - the highest amount on record.

Rising inventories typically signal weak demand in the world's top oil consuming nation and puts further downward pressure on prices in a saturated market.

"We remain slightly sceptical of further (price) increases," Phillip Futures analyst Daniel Ang said in a market commentary.

Ang said a slight weakening of the dollar after the US Federal Reserve left interest rates unchanged Wednesday could have limited the decline, but added the oil price support "should not last for long".

Higher US interest rates are a boost to the US currency, making dollar-priced oil more expensive to holders of weaker units, dampening demand.

AFP