Oil hovers above $81 amid mixed U.S. demand signs

Oil prices hovered above $81 a barrel Wednesday as an upward revision of U.S. economic growth and a report showing an unexpected jump in crude inventories provided mixed signals on demand.

By early afternoon in Europe, benchmark oil for January delivery was up 20 cents to $81.45 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost 49 cents to settle at $81.25 on Tuesday.

"It is remarkable that oil prices have even picked up a little overnight, said a report from Commerzbank in Frankfurt. "Price slumps in the direction of $80 are apparently being seen by investors as buying opportunities."

The American Petroleum Institute said late Tuesday that crude inventories rose 5.2 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had forecast a drop of 1.9 million barrels. Inventories of gasoline and distillates fell, the API said.

"The inventory build was attributable to a huge rise in crude oil imports," Commerzbank said. "There had evidently been delays in unloading tankers and imports had consequently fallen to an eight-month low the week before, which has now been corrected."

The Energy Department's Energy Information Administration reports its weekly supply data — the market benchmark — later Wednesday.

U.S. gasoline demand fell 0.9 percent last week, according to MasterCard. Demand is up just 0.4 percent so far this year from the same period last year, MasterCard said Tuesday.

Oil prices were supported by an upward revision of third quarter gross domestic product growth. The Commerce Department said Tuesday that the economy expanded at a 2.5 percent annual rate in the July-September quarter, up from the 2 percent pace initially estimated.

"The better than expected GDP figures that can easily conjure up ideas of stronger than expected oil demand growth," Ritterbusch and Associates said.

Oil prices managed to rise Wednesday despite a stronger dollar, which makes crude more expensive for investors holding other currencies — and usually pushes oil futures lower.

"We do not see the dollar rally ending just yet, and so further strengthening here could come back and knock energy prices with more authority next time around," said a report from MF Global in New York.

Hampered by fears that Ireland's economic crisis will spread to other countries in Europe, the euro fell to $1.3332 Wednesday from $1.3374 late Tuesday in New York, while the British pound slipped to $1.5777 from $1.5781.

In other Nymex trading in December contracts, heating oil rose 1.44 cents to $2.264 a gallon and gasoline added 1.64 cents to $2.1506 a gallon. Natural gas fell 1.9 cents to $4.245 per 1,000 cubic feet.

In London, Brent crude rose 29 cents to $83.54 a barrel on the ICE Futures exchange.