Oil hovered above $73 a barrel today, giving up some of the previous day's gains after data showed a large build in U.S. crude stocks, signalling persistently weak demand in the world's top energy consumer.
Oil had settled more than 2 per cent higher yesterday, buoyed by a weaker dollar, gains on Wall Street, and a huge snowstorm looming over the U.S. Northeast, the world's largest consumer of heating oil.
US crude for March delivery fell 53 cents to $73.22 a barrel by 0333 GMT, after settling at $73.75 per barrel yesterday.
London Brent crude was down 64 cents at $71.49.
Crude prices are down nearly 8 per cent this year to stand at about half their July 2008 high of more than $147 a barrel.
US crude inventories jumped by 7.2 million barrels to 337.6 million barrels last week, against expectations of a rise of 1.5 million barrels, and despite a drop in crude imports and weekly crude runs.
Gasoline inventories also rose more than expected, climbing 1.6 million barrels to 228.8 million barrels, exceeding analyst estimates of a 500,000 barrel build.
Traders will await a report from the Energy Information Administration (EIA) due on Friday for further clues on the rate of demand recovery in the world's largest oil user.
The EIA said yesterday its weekly data, normally released today, will be delayed until Friday due to the snowstorm blanketing the U.S. capital.
US heating demand this week is seen 11.5 per cent above normal, due to the storm sweeping across the mid-Atlantic, weather services said.
Further price support came from the weaker dollar, after investors unwound short positions in the euro on reports that a rescue package for Greece was in the works.
European Union leaders will hold a special summit on the economy tomorrow and speculation is swirling that a package will be hammered out soon for Greece.
Oil tends to rise when the dollar falls, making crude and petroleum products cheaper for non-dollar buyers. Weakness in the dollar also encourages investors to move into more tangible investments such as commodities.
Investors increasingly take trading cues from wider economic data, as they await signs of a recovery in the global economy and a potential rebound in flagging energy demand.
Crude prices have been hit by data showing bulging fuel stockpiles in the United States despite cold weather, concerns about slower Asian demand if China further tightens its monetary policy, and more recently, jitters over Europe's financial stability.
Reuters