Oil slips below US$44 briefly

The market remains worried about the global glut of crude. Photo / Jonathan Drake / Bloomberg News

Oil prices closed higher after a volatile session that saw the New York price drop below US$44 a barrel for the first time since March 2009.

While the market remained worried about the global glut of crude, the US benchmark futures contract, West Texas Intermediate for March delivery, finished up US8c to close at US$44.53 a barrel yesterday, after falling as low as US$43.58.

Brent North Sea crude for March, the key European contract, also swung sharply before settling at US$49.13 a barrel in London, a gain of US66c from Thursday's closing level.

The sharp swings followed Thursday's stiff losses, which came on another surge in US crude stockpiles.

"Yesterday's inventory reports continue to fuel fears, with excessive supplies on the market," said Gene McGillian of Tradition Energy.

"We saw that huge growth in US inventories and new records in production levels," McGillian said.

According to the Department of Energy, US crude-oil stockpiles last week surged to the highest level in weekly data tracked since 1982. US production, meanwhile, rose to the highest level since at least 1983.

Since the report, "there hasn't been anything new that seems able to change the direction of the market", McGillian said.

The slight rebound in prices yesterday was partly because market volatility encouraged speculators to snap up crude at lower prices, said James Williams of WTRG Economics.

"The only glimmer of hope in yesterday's inventory report were the sharp falls in gasoline and distillate stocks on the back of robust demand.

"That said, this will hardly be sufficient to prevent crude oil stocks from swelling even further," Commerzbank said in a market note.

Daniel Ang, investment analyst at Phillip Futures in Singapore, said the US stockpiles surge came as "no surprise" as refinery utilisation rates in the world's top crude consumer have been low.

However, "what is really shocking is that US production still continues to increase despite low crude prices", Ang said. "Without a drop in US crude production, it is going to be an uphill battle for oil bulls."

Oil prices have fallen about 60 per cent since June amid a supply glut, boosted largely by robust US shale-oil production, and weak global demand.

-AAP