London: Oil prices rose above $46 a barrel on Tuesday, boosted partly by cold weather in top energy consumer the United States, plus signs Opec oil supply cuts may have begun to underpin prices.
US light, sweet crude for March delivery rose 56 cents to $46.29 a barrel by 4:45pm. It touched a session high of $47.49 a barrel.
US crude has rebounded from below $33 a barrel in the past week.
London Brent crude climbed 43 cents to $47.39 a barrel.
The US cold snap has helped prices move up from lows earlier in January of $32.7 a barrel, but analysts say the recovery may be temporary.
“Unless Opec production cuts in January were substantially greater than what we have assumed, it is still too early to be calling an end to this current bear market,” Goldman Sachs said in a research note.
Oil’s supply/demand picture remains weak, Goldman said, pointing to a large counter-seasonal stock build in the United States and extremely weak demand in China, the world’s second largest energy consumer.
Oil has dropped more than $100 from a record peak above $147 a barrel in July last year, depressed by falls in demand as the credit crisis has pushed the global economy towards recession.
Goldman said retail investors were moving into oil, attracted by its low price, so that speculative positions or “length” in the oil market is now larger at $45 a barrel than it was at $147.
US crude oil stocks are expected to have risen a further 2.7 million barrels last week, the fifth straight week of gains. The government data is due out on Wednesday.
Colder weather is expected to help draw down distillate stocks by 800,000 barrels, according to a Reuters poll. Gasoline stocks are likely to have risen by 1.3 million barrels.
“The economic situation, oil stocks do not support higher numbers,” said Julian Keites of brokerage Newedge in a research note.
“But in conjunction with Opec cuts that began in November ‘08 and talk they will meet again if oil goes below $40, seems to provide market confidence and thus trading is at the top end of the range $37-$52.“
The Organization of the Petroleum Exporting Countries (Opec) has agreed to reduce supply by 4.2 million barrels per day since September to try to support prices. The producer group is due to meet next in March.
Oil traders will get an early indication of Wednesday’s US government data with the release later today of inventory figures from the industry group the American Petroleum Institute, as the API shifts to a new, earlier release schedule.
A cyclone off western Australia has shut down nearly half of the country’s oil output, but some operators said production was likely to resume by Wednesday as the storm weakens.
Later today US President Barack Obama goes to Capitol Hill to campaign for an $825 billion economic stimulus package to be put to a House vote within days.