Oil rebounds after 4% overnight slump

OIL LATEST: Oil rebounded on Wednesday after a four percent slump in the previous session. (Getty Images)

Oil recovered more than $2 a barrel to rise above $44 on Wednesday after an overnight slump by 4 percent on grim forecasts of lower US demand.

The market looked to Wednesday's weekly US inventory report that may show rising crude stocks, and then to OPEC's Dec. 17 meeting where the group is expected to cut more output.

US crude for January delivery rose $2.02 to $44.09 a barrel by 5.23pm UAE time. On Tuesday oil fell $1.64, or 3.75 percent, to settle near a four-year low of $42.07 a barrel.

London Brent crude was up 196 cents at $43.49.

Analysts said gasoline pump purchase data in the United States on Tuesday showed its first year-on-year increase since April, with sales up 0.3 percent in the week ending Dec. 5.

"We can't really talk about 'demand destruction' in the US anymore," said Olivier Jakob, an analyst at Petromatrix.

The Mastercard data is an estimate based on gasoline pump sales and differs from the US Department of Energy's weekly demand data, which is an implied estimate at loading terminals.

The US Energy Information Administration (EIA) on Tuesday said it expected global oil demand to fall 50,000 barrels per day in 2008 and 450,000 bpd in 2009, marking the first drop in world oil demand year-to-year since 1983.

The lower forecast came as EIA revised its 2009 world GDP growth estimate down to 0.5 percent from 1.8 percent last month.

The EIA's weekly inventory data due at 7.35pm UAE time could show that crude stocks rose 1.0 million barrels, according to an expanded poll of 13 analysts by Reuters.

Asian stocks rallied more than 3 percent to a one-month high on Wednesday on hopes governments worldwide would help out ailing industries and implement stimulus measures as they combat a deepening financial crisis.

European shares were up 0.2 percent in choppy trade.

But in spite of a market inspired by hopes of worldwide government help for ailing industries and stimulus measures, overall economic indicators showed little in the way of optimism.

China's November crude oil imports hit a year low, as the world's secong-largest oil user shipped in 13.36 million tonnes last month, official data showed, a 14.6 percent cut in daily volumes from October and 1.8 percent down on November last year.

"Sentiment rules the oil market at the moment, with most traders tracking equities," said Andrey Kryuchenkov, vice president of commodities research at VTB Bank.

"A lot of people will wait to see how much OPEC will but by next week, and then whether then can comply with the quota cuts."

Producer group OPEC, faced with a loss of more than $100 a barrel in oil prices since July, has already agreed to cut about 2 million bpd to support prices this year, and members are leaning toward more cuts at their meeting in Algeria.

OPEC top producer Saudi Arabia, which has called $75 a barrel a "fair price", will make bigger supply cuts to some of its Asian and European customers next month. (Reuters)

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