Oil gains ground before US energy report

London (AFP) – World oil prices rose Wednesday, but gains were limited before a key report expected to show further build-up in US crude inventories, dealers said.

US benchmark West Texas Intermediate (WTI) for April delivery rose 10 cents to $ 49.38 a barrel.

Brent North Sea crude for April climbed 25 cents to stand at $ 58.91 a barrel in London midday deals.

Crude futures had also fallen on Tuesday as traders estimated a key report will show another increase in US crude inventories that already are at record levels.

Prices also sank this week as traders worried about abundant global supplies alongside slower economic growth, with no sign of a slowdown in rising US crude stockpiles.

“There will probably be further increases in US inventories and this is bad for global crude oil prices which will fall even further,” David Lennox, resource analyst at Fat Prophets in Sydney, told AFP.

Later on Wednesday, the US Department of Energy will release the official stockpiles report for the week to February 20.

Crude oil stockpiles are expected to have risen by 3.75 million barrels last week, according to analysts polled by Bloomberg News.

That would add to the 425.6 million barrels in stockpiles that were reported last week.

“The market is still oversupplied, and US oil production continues to grow unperturbed,” said Commerzbank analysts.

Daniel Ang, investment analyst at Phillip Futures in Singapore, said the global supply glut cannot be reversed unless US crude production falls from current levels of about 9.2 million barrels a day.

“Unless it drops to below nine million barrels per day, we do not expect this oversupply issue to end,” Ang said.

The market was also digesting US President Barack Obama’s decision on Tuesday to veto legislation allowing the Keystone XL oil pipeline to be built between Canada and the United States.

The 1,180-mile (1,900-kilometre) TransCanada-built pipeline would transport crude from energy-rich Alberta to a network of pipelines that reach across the United States to the shores of the Gulf of Mexico.

Obama says he is not against the project in principle, but accused legislators of trying to “circumvent longstanding and proven processes” for gauging whether Keystone is in the national interest.

The project has in recent years pitted environmental groups against the oil industry, which has argued that it will bring much-needed jobs to the United States and help it achieve energy self-sufficiency.

Lennox said Obama’s decision is likely to be “insignificant in the short term” to crude oil prices as it was widely expected.

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