* U.S. retail sales fall more than expected in December
* U.S. oil data expected to show higher crude inventories
* Saudi Arabia to pump below OPEC target, ready to cut more
* Libya says existing OPEC output cuts should support market
(Updates prices)
By Christopher Johnson and Joe Brock
LONDON, Jan 14 (Reuters) - Oil slipped back to below $38 a
barrel on Wednesday, giving up big early gains after news of
worse-than-expected U.S. retail sales figures depressed stock
markets.
The U.S. Commerce Department said total retail sales fell
2.7 percent to a seasonally adjusted $343.2 billion last month.
Analysts polled by Reuters had forecast December retail sales
falling 1.2 percent. []
The United States is the world's biggest oil consumer and
recession there means significantly weaker oil demand.
The retail sales data almost wiped out earlier gains on the
back of talk of more production cuts by OPEC and a cold snap in
the United States that has boosted heating oil demand.
U.S. light crude <CLc1> was down 23 cents at $37.55 a barrel
by 1515 GMT after earlier hitting a high of $39.45. London Brent
crude <LCOc1> gained 59 cents to $45.42 per barrel.
"The retail sales figures are horrible. They confirm that
the United States is in recession, which means oil demand is
falling and so the market is weakening," said Rob Laughlin,
senior oil analyst at MF Global.
"Subject to the U.S. oil data today being in line with
forecasts, then I think prices can keep going down."
OIL INVENTORIES BUILDING
A U.S. government report due later on Wednesday was expected
to show crude stocks rising for the third consecutive week, by
more than 2 million barrels. U.S. crude oil stocks have swelled
as demand in the top oil consumer has wilted, pushing U.S. crude
into a deep discount compared with Brent crude.
A Reuters poll ahead of Wednesday's U.S. inventory report
saw a 2.2-million-barrel build in crude stockpiles in the week
to Jan. 9, and distillate and gasoline supplies rising by 1.1
million and 1.6 million barrels respectively. []
The global financial crisis, the worst since the 1930s, has
pushed much of the industrialised world into recession, causing
oil demand to slump and crude prices to tumble by more than $100
from its record peak of above $147 a barrel last July.
Oil producers in the Organization of the Petroleum Exporting
Countries have responded to the recession by cutting output.
Top exporter Saudi Arabia said on Tuesday it was prepared to
go even further than cuts it had made since December if the
market warranted it, while OPEC's secretary general said the
group may reduce oil output again at its meeting in March.
Libya's top oil official said on Wednesday OPEC's existing
oil output cuts should support oil prices and that it was too
early to tell if a further production reduction. []
OPEC decided to cut supply by 2 million bpd at meetings in
September and October. In December, it agreed to lower output by
a further 2.2 million bpd as of Jan. 1, a record reduction.
So far OPEC's moves have had little obvious impact on the
market and oil for prompt delivery is trading at a big discount
to future barrels with the market in what is called a contango.
The February contract for NYMEX crude traded at more than a
$6 discount to March futures as high inventory levels pressure
the U.S. benchmark. Stock levels at Cushing, Oklahoma, the
delivery point for U.S. crude futures, are at record levels.
The front-month U.S. crude contract is also at a record
discount to North Sea Brent crude futures <LCOc1> with a spread
of around $7.90 a barrel between the two contracts.
(Editing by James Jukwey)
