World oil prices pared their gains this evening as traders absorbed a far larger than expected jump in crude inventories in the US, the world's biggest crude consuming nation.
New York's main contract, light sweet crude for delivery in March, rose by just four cents to $86.23 a barrel, having earlier risen close to $87. London's Brent North Sea crude for March delivery added $1.35 to $96.60 a barrel, as traders also awaited the outcome of the Federal Reserve's latest interest rate meeting.
The US government's Department of Energy said American crude oil inventories jumped 4.8 million barrels in the week ending January 21.That was the largest weekly increase in the past three months and signalled weaker demand for energy.
Expectations had been for a smaller gain of 900,000 barrels, according to analysts. The DoE added that US petrol stockpiles leapt by 2.4 million barrels last week.
Prior to the energy report, oil prices had risen even higher in earlier trade. Analysts said that prices had rebounded, supported by improved optimism on the US economic conditions, after President Obama proposed cutting the corporate tax rate as well as scrapping loopholes.
US President Barack Obama called last night for a freeze in federal discretionary spending, in his State of the Union speech.
Eyeing the ever-swelling US debt, Obama vowed sweeping reforms to government, but insisted lawmakers should wield a scalpel rather than an axe when tackling spending.
Oil prices had sank yesterday in the wake of disappointing economic data in the US and Britain which stirred fears of slowing energy demand. Traders also digested news that US home prices dropped in November for the fifth month in a row.
Prices also fell on Monday after OPEC kingpin Saudi Arabia said the cartel may raise its crude output to meet an increase in demand this year.
After flirting with $100 a barrel earlier this month, oil has since pulled back amid jitters over the strength of global energy demand.
