Oil reverses gains, slides back below $82

Oil prices reversed earlier gains by Wednesday afternoon as traders reconsidered the government's weekly crude inventory report, which showed a smaller increase in supplies than expected, the Associated Press reports.

Benchmark crude for April delivery was up a penny at $81.50 on the New York Mercantile Exchange. Oil prices rose as high as $83.03 a barrel before sliding back, according to the AP.

The Energy Information Administration said crude inventories grew last week by 1.4 million barrels to 343 million barrels. Analysts expected a build of 2.1 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

"There was nothing inherent in the report to justify buying up to $83 per barrel," said oil analyst and trader Stephen Schork. He cautioned against focusing on one week of data which "doesn't mask the fact that we have seen enormous builds and smaller draws in the weeks prior to this."

Meanwhile OPEC said world oil demand should grow by 900,000 barrels per day this year, an upward revision from last month's forecast. OPEC said its forecast depends on a sustained global economic rebound, particularly in the U.S.

While oil prices have risen about 17 percent since early last month, crude demand in the U.S., the world's largest consumer of oil, has remained sluggish.

"We really have to look overseas for growth," said Andrew Lipow, president of Lipow Oil Associates. "Oil demand is increasing in the usual suspects like China and India, but it's also increasing throughout the Arabian Gulf and in Africa."

This means higher gasoline prices for U.S. consumers, he added. Retail gasoline prices climbed again on Wednesday. The nationwide average rose 0.9 cents to $2.768 per gallon, according to AAA, Wright Express and Oil Price Information Service.

Prices have risen 11.6 cents in the last month and are now 82.7 cents higher than levels of a year ago.

The dollar edged down slightly against the euro in afternoon trading. A weaker dollar makes crude cheaper for investors holding foreign currencies.

In other Nymex trading in April contracts, heating oil rose 0.71 cent to $2.0969 a gallon. Gasoline gained 1.09 cents at $2.2712 a gallon. Natural gas fell 1.8 cents to $4.498 per 1,000 cubic feet. Earlier, natural gas hit a 52-week low of $4.450.

In London, Brent crude lost 3 cents at $79.88 on the ICE futures exchange. (AP)