Oil Dips Below 100 $, Rises Back

Oil fell having jumped by over $4 yesterday on profit taking and amid some concern about demand weakness but tight U.S. gasoline stocks, which had helped prices surge yesterday, limited losses.

New York's main WTI benchmark jumped yesterday after the United States reported its gasoline stocks fell by more than the market had expected. Crude stocks, meanwhile, rose above expectations but this was not enough to stop prices surging.

"The stats out in the U.S. revealed a crude build of 7.4 million barrels, significantly above the forecast levels which would have been bullish for oil were it not for the gasoline stock number which came in at over double the forecast," said Bank of Ireland analyst Paul Harris. "The 4.5 million barrel decline in gasoline is important coming as it does ahead of the driving season in the U.S., the peak demand period."

Uncertainty over the global demand outlook has also weighed on prices this morning, however, after United States Federal Reserve Chairman Ben Bernanke said yesterday that the world's biggest economy may slip into a recession, the first time that he acknowledged that possibility.

"Despite yesterday's run higher, we think it is unlikely that we will be revisiting the recent highs anytime soon. Gasoline alone is not capable of sustaining the advance, as the complex is facing twin prospects of relatively high stocks and anaemic demand," said MF Global analyst Edward Meir. "We cannot fathom how commodities can push to new highs just as the odds of a potentially worldwide recession intensifies.

"The macro backdrop, which has looked weak in the U.S. for some time now, is starting to impact worldwide growth prospects at a faster rate," he added.