Oil: Price edges above US$47 as US heating fuel stocks drop

LONDON - Oil prices picked up above US$47 a barrel on Wednesday after US data showing heating fuel and crude inventories fell, although they remained well off recent peaks as petrol stocks built ahead of peak summer demand.

US light crude gained 33 cents to US$47.45 a barrel, recovering from a low of US$46.45. Prices have still retreated from last week's high near US$50.

London Brent crude picked up six cents to US$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 petrol 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 northeast 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 petrol stocks, taking them to a comfortable 8.1 million barrels above last year. Refiners try to build petrol stocks ahead of peak summer demand in the northern hemisphere.

An unexpectedly big draw on supplies last week followed by fires at the petrol 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 US$22-US$28 price target, Opec appears set to defend US$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 Jan. 1 after prices dipped as low as US$40.25 a barrel in early December.

- REUTERS