London : Oil fell towards $76 (Dh279.52) a barrel yesterday as rising crude inventories in the US signalled a rebound in US economic activity but failed to translate into higher demand.
US crude for March delivery declined 74 cents to $76.24 a barrel at 1228 GMT, while London ICE Brent shed 76 cents to $75.16.
A government report on Wednesday showed US crude stockpiles rose by more than expected as imports jumped and refineries kept operating at unusually low rates.
Although manufacturing has picked up, US demand for distillate fuel, including diesel, was more than 9 percent lower in January than last year, according to the US Department of Energy.
US oil refineries are now operating at just 77.7 per cent of capacity, the lowest recorded level since 1990 barring hurricane disruptions.
"There was not much inspiring on the demand side, with total product demand down 2 per cent from a year ago," MF Global analyst Edward Meir said.
"We suspect that the bias in energy will be lower over the next two days, particularly if the dollar continues to regain its footing."
The dollar rose to a seven-month high against the euro yesterday.
Strength in the greenback often pressures dollar-priced commodities as they become more expensive for holders of other currencies.
Oil has rebounded by more than $4 this week from a six-week low of $72.43 on January 29. But prices are still far from a 15-month high close to $84 reached on January 11 and well below the record peak close to $150 in July 2008.
Next indication
Employment data scheduled to be out in the US today is expected to provide the next indication of the pace of economic recovery.
Non-farm payrolls are expected to have increased by 8,000 in January, the second monthly gain since the recession started in December 2007, according to 20 forecasters polled by Reuters.
Some energy analysts, including Barclays Capital's Paul Horsnell, head of commodities research, remain upbeat that industrial demand for oil will soon recover.
"The evidence of a recovery in manufacturing, better trucking indications and a slow turning of the manufacturing goods inventory cycle all still point to an improvement in diesel demand that will eventually percolate through to the data," Horsnell said in an e-mailed note.
Royal Dutch Shell Plc posted a 75 per cent fall in fourth-quarter profits to $1.18 billion yesterday, as the oil major was punished for falling output and its focus on the depressed refining and natural gas businesses.
Full year output from Europe's second largest oil company was down 3 per cent, while low refining margins hit the firm with a $1.76 billion loss at its oil processing arm.
