Oil: Prices steady as US winter stocks edge up

LONDON - Oil prices held steady on Wednesday as the US government reported the first build in distillate fuel supplies for 10 weeks, easing supply concerns ahead of winter.

US light crude was 11 cents up at US$49.05 a barrel, up 50 per cent from the start of the year but more than US$6 off their all-time peak one month ago. London Brent was up 5 cents at US$44.50 a barrel.

The US government reported that distillate stocks, which include heating oil and diesel fuel, rose one million barrels to 115.6 million barrels, the first build since mid-September.

Distillate stocks are still 14 per cent below last year. Heating oil stocks fell by 200,000 barrels to 48.9 million barrels, a 16 per cent year-on-year deficit, the Energy Information Administration (EIA) said.

"We're seeing refinery yields starting to be skewed in the direction of distillates. Distillate imports were up and that contributed to the build as well," said Jim Rittherbusch president, Ritterbusch and Associates in Illinois.

So far major consuming nations have experienced mild winter weather and a production surge by the Opec cartel has helped rebuild crude inventories in consuming nations.

But a cold spell will drive up domestic heating usage in the heavy consuming Northeast. US distillate demand is already running about eight per cent above last year due to strong trucking and manufacturing activity.

"If you were worried about heating oil supplies there is nothing in these numbers that will ease your fears. If we get cold weather in the US Northeast this market could really take off," said Phil Flynn, analyst, Alaron Trading in Chicago:

Opec has been pumping at the highest levels in 25 years to meet strong demand growth, especially in China and the United States.

A Gulf source said on Wednesday that Saudi Arabia will keep pumping oil at about 9.5 million barrels per day (bpd) through the end of the year and that the kingdom saw no sign of a let-up in strong oil demand.

Opec itself has predicted a rare winter stockbuild if it maintains current rates of around 30 million bpd. The group meets on Dec 10 in Cairo to review output policy and is expected by traders to keep official output limits unchanged.

"Global oil supply will exceed demand by about 400,000 barrels per day during the fourth quarter," said Cambridge Energy Research Associates in a report.

"This raises the possibility that oil prices could continue to fall through the end of the year if the global supply chain avoids a significant dislocation," said CERA.

Traders remain on edge over supply hiccups, especially in Iraq, where exports from the main southern terminal were running at only one million bpd following a pipeline blast on Monday.

Oil sources said it may take a week to mend the corroded pipeline, which has cut flows by 800,000 bpd.

Vietnam was forced to shut about 400,000 bpd of offshore oil production for three days due to a typhoon, while output at Canada's second-largest offshore field, the 165,000-bpd Terra Nova, was still suspended after a spill on Sunday.

- REUTERS