Oil rises on short covering but supply worries loom

Thu Jan 29, 2015 4:08pm EST
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By Barani Krishnan

NEW YORK (Reuters) - Global oil prices firmed slightly on Thursday but not before U.S. crude hit a near six-year low and benchmark Brent pared gains on data showing fresh additions to already record-high U.S. oil inventories.

Oil prices had risen broadly earlier in the day after preliminary U.S. data showed weekly jobless claims at a near 15-year low, indicating further strength in the world's largest economy.

But crude futures in New York fell to an April 2009 bottom by midmorning, and only rose toward the close on short-covering.

Prices tumbled after a report by oil services firm Genscape showed fresh builds of 1.6 million barrels at the Cushing, Oklahoma delivery point for U.S. crude in the period of Jan. 23 through Jan. 27.

Inventories of U.S. crude were already at record highs for the week ended Jan. 23, according to government data issued on Wednesday. Last week's build alone was almost 9 million barrels, taking stockpiles to nearly 407 million, the highest level since the government began keeping such records in 1982.

"There are absolutely very few reasons to buy crude oil now and the only path I see from here is lower," said James Williams, energy economist at WTRG Economics in London, Arkansas.

U.S. crude CLc1 settled up 8 cents at $44.53 a barrel, recovering from its session low of $43.58. Traders said some market bears cut back on their short positions after noting reductions in capital spending and exploration by U.S. oil firms reporting quarterly earnings.

Technical analysts, however, think it will be hard to defend U.S. crude at above $40 in coming weeks as technical selling pressure combines with dismal fundamentals to bear down on the market.   Continued...

A man fills up his car at a petrol station in Rome January 6, 2015. REUTERS/Max Rossi