Crude oil futures pared gains to trade near $38 a barrel in New York on speculation the recession in the world’s largest economies will stifle demand for fuel. Japan’s economy, the world’s largest oil consumer after the U.S. and China, contracted the most since 1974 in the fourth quarter, a government report showed today. Oil supply may drop by 2 million barrels a day this year, International Energy Agency Executive Director Nobuo Tanaka said in London today. Oil for delivery next month is “under a lot of downward pressure on more crude oil inventory builds in the U.S. and a continuous flow of negative economic data,” Harry Tchilinguirian, a senior oil-market analyst at BNP Paribas SA in London, said by phone today. Crude oil for March delivery fell 6 cents, or 0.2 percent, to $37.45 a barrel at 11:29 a.m. London time. It earlier gained as much as 98 cents, or 2.6 percent, to $38.49 a barrel on the New York Mercantile Exchange. Floor trading on Nymex will be closed today for the Presidents’ Day holiday. Japan’s gross domestic product contracted at an annual 12.7 percent pace in the fourth quarter 2008, the Cabinet Office said today in Tokyo. That followed a 13.9 percent drop in exports from the third quarter. Narrower Discount World oil demand is unlikely to rebound until 2010, when it may begin rising by about 1 percent a year through 2013, Tanaka said today. Oil for March delivery gained relative to longer-dated prices as the contract approaches expiry on Feb. 20, Tchilinguirian said. The April contract was unchanged at $41.95 a barrel, after falling for five consecutive days. Oil jumped 10 percent to $37.51 a barrel on Feb. 13, its first gain in six days and the largest increase since Jan. 21. Traders who had been betting on further declines bought oil to limit losses during the three-day holiday weekend in the U.S. The Organization of Petroleum Exporting Countries, supplier of 40 percent of the world’s oil, will probably cut production again next month if prices remain below $40, Iran’s representative, Mohammad Ali Khatibi, said yesterday. “OPEC supply cuts will take time before they make an impact on consumer inventories because global refinery utilization rates are depressed,” Tchilinguirian said. Stockpiles in the U.S., the world’s biggest oil consumer, have risen for the past seven weeks and are at their highest since July 2007, according to Energy Department records. OPEC last week cut its 2009 oil demand forecast for a sixth straight month, citing a “sudden and massive” drop in consumption. The group fixed a daily production ceiling of 24.845 million barrels from Jan. 1 for its 11 members with quotas, taking its cuts since September to 4.2 million barrels a day. Venezuela will support oil quota cuts if they are necessary, Energy and Oil Minister Rafael Ramirez said in Caracas yesterday.

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