Oil prices fell in Asia today 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 37 cents to $48.11 in late-morning trade and Brent crude for February delivery fell 56 cents to $48.13.

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

Weak fundamentals

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

US crude stockpiles

In the US, 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 United States, the world’s top crude consumer. However, some analysts also say yesterday’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 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,” Spooner said.

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 unveils a fresh stimulus programme.

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