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13 April 2024

Oil prices rise before US inventory data

Oil prices climbed to up to $45.52 a barrel. (AFP)

Oil prices rose on Wednesday as the market awaited the latest weekly snapshot of crude inventories in the United States and digested latest demand forecasts by the International Energy Agency (IEA).

Brent North Sea crude for delivery in March climbed cents to $45.52 a barrel in London.

New York's main oil futures contract, light sweet crude for March, gained 22 cents to $37.77 per barrel.

All eyes were on the inventory report from the US Department of Energy, due at 1530 GMT.

"The market is expecting yet another build in crude inventories and a draw in distillates," said VTB Capital analyst Andrey Kryuchenko.

"A bearish report could add pressure to an already struggling New York crude market."

Despite prices rising on Wednesday, they remain massively off record highs above $147 reached last July when fears of supply disruptions had sent them rocketing.

Since then, prices have plunged as the global economic slowdown hits global demand for oil. The United States meanwhile is the biggest energy consuming nation.

The International Energy Agency meanwhile on Wednesday again cut its forecast for global oil demand this year, but warned about a future supply crunch because of current low investment levels.

The energy watchdog for industrialised nations forecast that global oil demand would measure 84.7 million barrels per day (bpd) on average in 2009 - 570,000 bpd less than its last forecast made in January.

At this level, demand would be 1.1 per cent or 1.0 million bpd less than in 2008, when demand also fell compared with the year earlier.

"Not only will the two-year contraction in oil demand be the first since the early 1980s, but 2009's decline will also be the largest since 1982," the IEA said in its monthly oil report.

The IEA, echoing warnings from industry insiders and Opec members, also warned that one of the effects of low prices would be a delay in investment in future capacity which will be needed once global growth picks up again.

The secretary general of Opec, Abdalla Salem El-Badri, said on Monday that members of the cartel had already postponed 35 oil drilling projects because of low crude prices.

He has said that Opec members needed a price above $50 per barrel for their exports to encourage investment and balance their government budgets.