Oil fell below $55 today on profit-taking, after jumping by 4.7 per cent a day earlier on news that the United States will build its emergency oil reserves and as cold weather took hold of the world's top consumer.
US light crude for March delivery was down 38 cents at $54.66 a barrel earlier.
The contract rallied $2.46 to $55.04 on Tuesday, the biggest daily gain since November 20th, after US Energy Secretary Sam Bodman unveiled a new push in the spring to add 11 million barrels to the country's Strategic Petroleum Reserves (SPR) at a rate of around 100,000 barrels per day (bpd).
London Brent crude was down 30 cents at $54.80. "The SPR news is very supportive of the price. And if you want to consider the Chinese strategic reserves, they have also been filling their reservoirs, all of that is very very supportive," said Andrew Harrington, a resource analyst at ANZ bank.
China has been accelerating the build-up of its strategic storage tanks, importing about 12.4 million barrels of crude in December, more than 50 percent above its November intake, industry sources said this month, indicating that at least 70 percent of those tanks had been filled.
US President George W. Bush also called for a doubling of the reserve's capacity to 1.5 billion barrels by 2027 in his annual State of the Union address to Congress.
The build-up is aimed at insulating the country from global price shocks by raising strategic reserves to about 97 days of imports. Some analysts view the build-up as a steadying influence on prices.