* IEA cuts forecast for '09 oil demand by almost 1 mln bpd
* Russia-Ukraine gas dispute rumbles on
* Bank of America, Citigroup post huge losses
(Recasts, updates with settlement prices)
By Edward McAllister
NEW YORK, Jan 16 (Reuters) - Oil prices rose 3 percent on
Friday, with short covering amid choppy pre-holiday trade
outweighing a gloomy demand outlook.
U.S. light crude for February delivery <CLc1> settled up
$1.11 to $36.51 a barrel. The contract, which expires on
Tuesday, sank on Thursday to $33.20, the weakest price in
nearly a month.
London Brent crude for March delivery <LCOc1> fell $1.11 to
end at $46.57 a barrel, maintaining an unusual premium to the
U.S. benchmark due to growing U.S. stockpiles.
"There's short-covering on the February contract, which is
expiring on Tuesday," said Andy Lebow, broker at MF Global.
"The market contango is also extraordinarily wide, also
provoking covering here," he added, referring to the March
NYMEX contract's $6 premium over February.
Prices had fallen earlier as the International Energy
Agency's revised down its estimate for 2009 demand by 940,000
barrels per day to 85.3 million bpd -- a fall of about 500,000
bpd year-on-year -- as the economic slowdown erodes
consumption. []
In its report, the IEA said Chinese oil demand would grow
at its slowest rate in eight years, rising by just 90,000 bpd
in 2009 as its GDP growth slows to 6.5 percent.
The Organization of the Petroleum Exporting Countries,
which already has cut 4.2 million bpd in supply from the world
market since September, could quickly deepen output cuts, if
needed, OPEC President Botelho de Vasconcelos has said.
[]
The global financial crisis has forced many economies into
recession, reducing energy consumption and dragging down oil
prices by more than $110 since a record peak in July.
Bank of America <BAC.N>, which recently absorbed Merrill
Lynch, and Citigroup <C.N> both reported huge losses for their
fourth quarters on Friday, including billions of dollars of
write-downs from exposure to debt and real estate markets.
One potential support for prices is the continuing contract
dispute between Russia and Ukraine that led to a cut of gas
supplies through Ukraine to Europe, affecting countries across
the continent.
The European Commission said on Friday that Russia and
Ukraine had a last chance this weekend to solve the dispute, or
risk seeing their relations with the bloc suffer.
The European Union normally gets a fifth of all its gas
from Russia via Ukraine. The loss of this supply has forced
generators to switch to oil and coal at a time when Europe is
experiencing bitter winter temperatures.
(Additional reporting by Robert Gibbons and Gene Ramos in New
York and Christopher Johnson in London; Editing by Marguerita
Choy)
