Oil rebounds on speculation

Crude oil rose, rebounding from its biggest decline in five weeks, on speculation that US inventories have fallen from their lowest in three years.

The US Energy Department will probably say that crude-oil stockpiles fell by 1.25 million barrels from 289.6 million barrels last week, according to a Bloomberg survey. Prices recovered from a tumble of almost $3 in New York yesterday on concerns of a US growth slowdown.

A supply decrease "would represent the eighth consecutive decline and would tighten the inventory situation further," analysts at PVM Oil Associates GmbH in Vienna, led by Managing Director Johannes Benigni, said in a report on Tuesday. "Supplies will remain tight over the next months."

Crude oil for February delivery rose $1, or 1.1 per cent, to $96.09 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $95.77 at 9:06 am in London.

The contract dropped $2.82, or 2.9 per cent, to $95.09 yesterday, the lowest close since December 24 and the biggest one-day decline since November 28. Prices have fallen 4.5 per cent from the record $100.09 a barrel reached on January 3.

"The move yesterday looks a bit overdone on the downside so I think some people thought it might move up a dollar from here,'' said Rowan Menzies, head of research for Commodity Warrants Australia in Sydney. "The performance of the stock market is speeding up the flow of capital from there into commodities."

Brent crude for February settlement rose as much as 95 cents, or 1 per cent, to $95.34 a barrel on London's ICE Futures Europe exchange. It was at $94.90 at 9:07 am London time.

The Organization of Petroleum Exporting Countries increased oil production 1.2 per cent in December as the United Arab Emirates raised output after finishing maintenance of fields, a survey showed.

Opec pumped an average 32.07 million barrels a day last month, up 370,000 barrels from November, according to the survey of oil companies, producers and analysts.

Production by the 12 members with quotas, all except Iraq, rose 435,000 barrels to 29.73 million barrels a day, almost 60,000 barrels above the group's new production target of 29.673 million barrels a day.

Opec is scheduled to meet on February 1 in Vienna, where it will assess winter oil demand, global economic growth and decide on production targets.