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  • News Desk
  • Feb 3rd, 2005
  • Comments Off on Oil edges above $47 as US heating fuel stocks drop
Oil prices picked up above $47 a barrel on Wednesday after US data showing heating fuel and crude inventories fell, although they remained well off recent peaks as gasoline stocks built ahead of peak summer demand. US light crude gained 33 cents to $47.45 a barrel, recovering from a low of $46.45. Prices have still retreated from last week's high near $50.

London Brent crude picked up six cents to $44.88 a barrel.

US inventories of distillate fuels, including heating oil and diesel, fell by a larger-than-expected 2.9 million barrels last week, leaving them 5.7 million barrels below this time last year, government figures showed on Wednesday.

"The drop in distillates was slightly more than expected, probably reflecting very strong demand amid cold temperatures," said Phil Flynn, analyst at Alaron Trading. "The gasoline number appears to be a surprise and may temper any bullishness."

Heating oil stocks fell after a cold snap hit key consuming region the US north-east in January, though the pressure on fuel inventories has eased as temperatures in the region have returned to seasonal norms this week.

Tempering the bullish data was a 1.6 million barrel build in gasoline stocks, taking them to a comfortable 8.1 million barrels above last year. Refiners try to build gasoline stocks ahead of peak summer demand in the northern hemisphere.

An unexpectedly big draw on supplies last week followed by fires at the gasoline units of two US refiners had spurred concerns over summer motor fuel supplies, nearly four months before the start of the peak season.

Crude inventories eased 300,000 barrels to 24.3 million, against analysts' expectations of a 1.5 million barrel rise.

OPEC oil producers are closely watching stock levels as officials have warned that a rapid build in inventories or sharp price decline could prompt a production cut before the cartel's next meeting on March 16.

Relief over OPEC's decision at the weekend to maintain current production levels has been balanced by the possibility that the cartel could still act swiftly to cut production ahead of the second quarter when winter demand ebbs, traders said.

Having finally abandoned its $22-$28 price target, OPEC appears set to defend $40 US oil by leaving the door open to deepening supply curbs to contain a springtime stockbuild.

It cut its production ceiling by 1 million bpd from January 1 after prices dipped as low as $40.25 a barrel in early December.

Copyright Reuters, 2005


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