Oil rebounds to near $56

Business Materials 18 November 2008 11:20 (UTC +04:00)

Oil rose near $56 a barrel on Tuesday, rebounding from a near 22-month low on stronger U.S. industrial output data, but fears that the global economic slump was further trimming fuel demand kept a lid on gains, reported Reuters.

U.S. industrial output rebounded by a stronger-than-expected 1.3 percent in October after a downwardly revised September drop that was the biggest fall in more than 62 years, according to a Federal Reserve report.

U.S. light crude for December delivery rose 72 cents to $55.67 a barrel by 0616 GMT, after settling at the lowest level since January 29, 2007 in the previous session.

London Brent crude rose 63 cents to $52.94 a barrel.

U.S. crude has plummeted more than 60 percent from its July record above $147 a barrel as the credit crisis has hit the real economy and limited fuel use in top consumers such as the United States.

On Monday, Japan became the latest major economy to fall into recession and Citigroup said it would cut 52,000 jobs, one of history's largest layoffs.

"Oil is still driven by concern about the weak outlook for oil consumption," said David Moore, commodity strategist at Commonwealth Bank of Australia. "Equity markets are not helping."

Japan's Nikkei share average slipped 2.3 percent on Tuesday, dented by Wall Street losses overnight, though bargain-hunting prevented further slides.

China became a net diesel exporter in October for the first time since August 2007 and remained a net gasoline exporter for a second month, as heavy inventories and higher refinery output lessened import needs.

That bodes ill for the global refining industry, which had counted on China's appetite for fuel stockpiling in the months before the August Olympics to pick up the slack left by a worldwide economic and consumption slump.

Mexico reopened the oil exporting port of Coatzacoalcos on Monday after bad weather had shut it, but the Dos Bocas port was still closed.

The Organization of the Petroleum Exporting Countries cut its 2009 global demand forecast, adding to signs the producer group could cut production further to stem the oil price drop.

OPEC's Secretary General Abdullah al-Badri said it was too early to say whether the producer group needed to cut output when it meets this month in Cairo.

OPEC, source of more than a third of the world's oil, has not yet called a full-blown policy meeting for the Cairo gathering on November 29. Ministers were set to meet informally on the sidelines of an annual gathering of Arab oil ministers.

Since early September OPEC has agreed to remove around 2 million barrels per day from oil markets, and several OPEC members want more cuts. Iran is calling for another 1 million to 1.5 million bpd in output cuts.

Looking to data on Wednesday, a preliminary Reuters poll showed U.S. crude inventories rose last week as refinery utilization held steady and imports rebounded. Crude inventories probably rose by 900,000 barrels.