LONDON (Reuters) – Oil rose more than 3 percent to above $39 a barrel Wednesday, as OPEC kept up talk of production cuts and a cold snap in the United States boosted heating oil demand.
Top exporter Saudi Arabia said Tuesday 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 group may reduce oil output again at its meeting in March.
U.S. light crude for February delivery rose $1.09 to $38.87 a barrel by 1030 GMT (5:30 a.m. EST). London Brent crude gained 78 cents to $45.61.
“I think we are up a bit this morning on the comments from OPEC but whilst we know they are genuinely making an effort to reduce output there is still a lot that needs to be done,” said Rob Laughlin, Senior oil analyst at MF Global.
“Yes $147 a barrel was too high but demand has fallen off a cliff since then and there just is not the need in the market for light, sweet crude. I think we’ve got further to fall,” Laughlin added.
The global financial crisis, the worst since the 1930s, has pushed much of the industrialized 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.
Saudi oil minister Ali al-Naimi said Wednesday he wanted reasonable returns for oil producers without hurting the global economy and he was especially committed to the needs of growing Asian markets.
U.S. INVENTORY DATA
Oil was also buoyed by a cold snap in the U.S. Northeast, the world’s biggest heating oil market, with temperatures forecast to be well below normal in the next week.
The winter chill is expected to cause heating oil demand to be 13.7 percent above normal this week, the National Weather Service said.
However, analysts said downside risks remained high. A U.S. 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.
U.S. crude oil stocks have swelled as demand in the top oil consumer wilts, pushing U.S. crude futures into a deep discount compared with Brent crude.
A Reuters poll ahead of Wednesday’s U.S. inventory report saw a 2.2 million barrel build in crude stockpiles in the week to January 9, and distillate and gasoline supplies rising by 1.1 million and 1.6 million barrels respectively.