Oil back up above $43
Stop-gap auto bailout agreement offsets bigger-than-expected supply of gasoline.
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NEW YORK (CNNMoney.com) -- Oil prices rebounded Wednesday after Congress reached an agreement with the White House on a bailout for the U.S. auto industry. Prices had fallen earlier after a government report showed a bigger-than-expected buildup in gasoline supplies.
U.S. crude for January delivery rose $1.45 to settle at $43.52 a barrel Wednesday. Prices had dipped as low as $41.89 after the inventory report's release.
The Department of Energy reported a 400,000 barrel a day increase in crude supplies Wednesday. That was below the 2.7 million barrel buildup expected by analysts polled by research firm Platts.
The report also showed a 3.8 million barrel increase in gasoline supplies, and a 5.6 million build in supplies of distillates, which are used to make diesel fuel and heating oil.
Analysts had expected the report to show a gasoline supplies increase of 1.4 million barrels, and a decline of 1.6 million barrels of distillates, according to Platts.
Auto bailout: The White House and Congressional Democrats reached agreement on a plan to hold off the collapse of the auto industry in the United States, the world's largest oil consumer.
The plan, which could provide $14 billion in loans to troubled General Motors and Chrysler, is expected to keep the companies operating through March and prevent the the layoffs that could occur should one of the Big Three fail. Ford, which is in better financial shape, is not expected to receive any of the $14 billion.
In total, the U.S. auto industry employs about 2 million people nationwide, according to the Center for Automotive Research. That total includes GM (GM, Fortune 500), Ford (F, Fortune 500) and Chrysler workers, as well as dealers and parts manufacturers.
Crude investors have been worried that a decline in the U.S. economy would continue to wear on demand for petroleum-based fuel.
OPEC cuts: Sinking demand for crude has put pressure on the Organization of Petroleum Exporting Countries, an international trade cartel whose members produce about 40% of the world's oil, to cut production in order to bolster prices.
Crude prices have plummeted more than $100 a barrel since hitting a record intraday high of $147.27 a barrel in mid July.
In October, OPEC pledged to cut production by 1.5 million barrels a day. Then OPEC announced on Mon., Dec. 8, that it would deepen those cuts at its meeting on Dec. 17.
"I think [dropping prices] are hurting them pretty badly," said Michael Lynch, president of energy consulting firm Strategic Energy & Economic Research Inc.
Some analysts predict that OPEC could pledge to restrict anywhere from 2 million to 3 million barrels a day. But they question how OPEC can meet another production cut when the group has not yet fully complied with its October promises, according to estimates.
In November, OPEC pumped about 28.16 million barrels a day, not including Indonesia, which leaves the group at the end of the year, and Iraq, according to research firm Platts. That is a decline of only 950,000 barrels a day from October.
"The bottom line is there is a lot of cheating going on," said Peter Beutel, oil analyst with Cameron Hanover. "If [a country] can sell higher volumes at the theoretically higher price, they're going to do better."
Falling demand: It is currently cheaper for buyers to purchase oil immediately rather than buy a contract for future delivery. This indicates that companies are trying to get rid of excess inventory, according to Lynch, and is a sign that the oil demand is falling.
Crude was selling at $42.07 a barrel yesterday in Cushing, Okla., a major hub for oil delivered to the Gulf Coast.
In its short-term global demand outlook released on Dec. 9, the Energy Department predicts global oil consumption will fall by 50,000 barrels a day in 2008, and by 450,000 barrels a day in 2009 - the first time in 30 years that worldwide oil demand will have fallen for two years in a row.
The government also revised down its prediction for 2009 oil prices, saying crude could go for an average of $51 a barrel, down from the $63.50 predicted last month. 
