Oil: Price climbs back above US$48, Opec supports

Oil prices rose on Friday, bolstered by expectations of possible Opec production cuts and reversing a slide in the previous session that was triggered by hefty stock builds in the United States.

But volumes were thin in a shortened trading session ahead of the US Presidents' Day holiday on Monday.

US light crude futures settled up 81 cents to US$48.35 a barrel on the New York Mercantile Exchange. London Brent crude gained 52 cents to US$46.34 a barrel.

US crude this week touched a three-week high of US$48.65, but fell back on Thursday after news of a smaller decline in natural gas storage than expected added to the impact of big increases in US crude and petrol inventories.

Crude stocks in the world's largest energy consumer are around 8.5 per cent higher than last year, while petrol stocks, up 7.4 per cent, are at the highest level since 1999.

Distillate inventories, which include heating oil and are still lagging year-ago levels, declined, but analysts are beginning to switch their focus to petrol stocks as winter in the Northern Hemisphere draws to a close.

"The only bullish news in the data was the distillates, but it is so late in the season," said Deborah White, senior analyst at SG Commodities.

Cooler weather in the US Northeast is expected into early March, forecasters said on Friday, which could bolster demand in winter's final days.

A more comfortable stock situation is partly offset by expectations the Organisation of the Petroleum Exporting Countries, which meets in Iran in March, will reduce output if prices fall too far.

Opec's acting secretary general said this week the cartel was learning toward an output decrease to defend prices against a second-quarter stock build, but the extent of any cut would depend on demand.

Bullish outlooks for oil demand this year from Opec and the International Energy Agency, the industrialized world's advisor, have helped to keep prices at the upper end of the US$45 to US$50 range in which they have traded since early January.

Global demand has climbed much faster than most analysts expected over the past two years, helping to push oil to a record high of US$55.67 last October.

Although the surge took many by surprise, producers and consumers have adjusted quickly to new price levels and sustained economic strength in Asia and the United States has lent support to the view higher fuel costs are not affecting growth severely.

"I think the world can live with US$45 oil," said Jeffrey Immelt, chief executive officer of diversified manufacturer General Electric Co.

- REUTERS