Oil prices rise ahead of US inventory report
NEW YORK (AP) - Oil prices rose above $40 Wednesday ahead of a government report that is expected to show U.S. crude inventories continue to swell.
The same pattern emerged last week when investors appeared to ignore forecasts that unused crude in storage would rise by 3.5 million barrels.
They were right and for the first time in six weeks the government reported crude levels actually fell. Those bidding up the price early made a good bet, as prices jumped even more after the government report.
On Wednesday in early trading, light, sweet crude for April delivery rose 63 cents to $40.59 a barrel on the New York Mercantile Exchange.
Analysts expected crude stocks would grow by 2.25 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
Investors see the buildup in crude as yet another sign the economy continues to struggle. Global demand is plummeting as millions of laid off workers keep their cars at home and manufacturers cut back on production.
The department said last week that inventories fell by 200,000 barrels, but industry experts said that was an aberration. Crude oil is expected to test U.S. storage capacity this year as the recession deepens.
Production cuts of 4.2 million barrels a day by the Organization of Petroleum Exporting Countries have not done much to bolster prices amid the plunge in demand. But further cuts could buoy the market - OPEC's leaders, who have said recently that they would like prices to rise to $70 a barrel, have said another cut is likely when they meet March 15 in Vienna, Austria.
Mike Zarembski, a senior commodity analyst at brokerage OptionsXpress Inc., said oil traders are heartened by reports that 80 to 90 percent of OPEC members were complying with production cuts.
"For the cartel, that's quite unbelievable," Zarembski said. "There were some expectations that some of those members would sneak in a few extra barrels to sell. But maybe OPEC is serious about doing something about low prices."
At the pump, gas prices extended their two-week drop, falling another penny overnight to a national average of $1.891 per gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. Gas prices are still 5 cents more than they were a month ago but $1.251 less than a year ago.
In other Nymex trading, gasoline futures gained nearly 2 pennies to fetch $1.10 a gallon. Heating oil rose less than a penny to $1.20 a gallon, while natural gas for March delivery slid 7 cents to $4.165 per 1,000 cubic feet.
Brent prices gained 13 cents to sell for $42.63 a barrel on the ICE Futures exchange in London.
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Associated Press Writers George Jahn in Vienna and Alex Kennedy in Singapore contributed to this report.
