Oil rebounds despite stock rises

A mild winter has boosted oil stocks

Oil prices rebounded above $55 after dipping earlier in the day - despite news that US stocks of crude and petrol had increased.

US light, sweet crude was 31 cents higher, at $55.35 while Brent oil gained 40 cents to $55.50 in London.

On Tuesday, oil prices jumped by almost 5% because of colder weather and US plans to keep more oil for emergencies.

Until recently a relatively mild US winter had reduced energy demand, and helped push up energy inventories.

'Lower level'

Oil prices jumped on Tuesday on news that the US government would boost emergency reserves by around 100,000 barrels daily from the Spring.

To do that, it would have to take oil out of the market.

However news that US inventories of crude, petrol and distillates rose last week dismissed concerns among some that the boost to the stockpile may swell demand.

Alaron Trading analyst Phil Flynn said that President Bush's announcement about increasing reserves should not have driven prices as high as they went on Tuesday.

"You're seeing the psychology of the market," he said.

"We spill that much every day. It's not going to make that much of a difference."

Analysts said reserves of distillates, including heating oil, could fall because of a severe cold snap in the Northeast.

Oil has been hovering in the mid $50-a-barrel range in recent weeks, a far cry from the $78.40 peak reached in July 2006 due to geopolitical fears.