SINGAPORE – Oil prices rose slightly Wednesday in Asia after hitting a three-year low overnight as investors try to gauge how much the slowing U.S. and Chinese economies will hurt demand for crude.
Light, sweet crude for January delivery was up 74 cents to $47.70 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract fell $2.32 overnight to settle at $46.96, after touching $46.82, the lowest level since hitting $46.20 intraday on May 20, 2005.
"The rallies we've seen have been false rallies, relief rallies," said Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne. "The mood is overwhelmingly bearish at the moment."
Investors have been discouraged by growing evidence that China's economy, the world's fourth largest, may slow more than previously expected. Property prices in China have plunged, leading analysts to expect a drop in construction, an important driver of Chinese growth.
The World Bank last week cut its 2009 Chinese growth forecast to 7.5 percent, the slowest in almost two decades.
"There are much clearer signs that China is slowing, and this has caused the recent leg down in prices," Pervan said. "The U.S. remains the major market, but the downturn in China is accelerating."
Oil prices have fallen about 68 percent since peaking at $147.27 in July.
A production cut by the Organization of Petroleum Exporting Countries in October failed to halt the slide in prices, and now the group is asking non-OPEC producers for help.
OPEC President Chakib Khelil said Tuesday oil producers such as Russia, Norway and Mexico should "express their solidarity" with OPEC, either by joining the cartel or by following its reductions of output quotas.
Russian officials have said they are preparing a cooperation agreement with OPEC that could be examined at the cartel's meeting this month in Algeria.
"If Russia cuts production, it gives a bearish signal because it shows Russia is clearly concerned about short-term weak demand," Pervan said. "Russia only reacts under major duress."
In other Nymex trading, gasoline futures rose 0.57 cent to $1.06 a gallon. Heating oil gained 1.68 cents to $1.60 a gallon while natural gas for January delivery was steady at 6.42 per 1,000 cubic feet.
In London, January Brent crude rose 66 cents to $46.10 on the ICE Futures exchange.