Oil price rally loses steam in Asian trade

SINGAPORE (AFP) - Oil prices fell in Asia on Thursday after a bargain-buying rally the day before lost steam, with a pick-up in US inventories reinforcing concerns about weak demand and a supply glut.

US benchmark West Texas Intermediate (WTI) for delivery in February fell 52 cents to US$47.96 in afternoon trade and Brent crude for February fell 62 cents to US$48.07.

Both contracts rose sharply on Wednesday - WTI gained US$2.59 and Brent advanced US$2.10 - as bargain hunters moved in after prices tumbled close to six-year lows.

Analysts say the market remains hobbled by weak fundamentals, notably softer demand and an oversupply of the commodity as the world's major producers have vowed to maintain production levels.

In the United States the Department of Energy said commercial crude stocks surged 5.4 million barrels in the week to January 9. That compares with market forecasts of a 1.75 million barrel gain, according to analysts polled by Bloomberg News.

Rising inventories signal weak demand in the US, the world's top crude consumer.

However, some analysts also say Wednesday's price rally could spur a further surge.

"Momentum is a big factor in market behaviour and as we observed such a huge surge, the market could feed on itself," said Mr Ric Spooner, market analyst from CMC Markets Sydney.

"Trading in the European and US markets would give us a clearer indication on where momentum is swinging," added Mr Spooner.

Sanjeev Gupta, who heads the Asia-Pacific Oil and Gas practice at professional services firm EY, said investors are also awaiting the European Central Bank's policy meeting to see if it unveils a fresh stimulus programme.