KEY POINTS:
Oil tumbled below US$58 today, retreating from sharp gains the previous two sessions, after a smaller-than-expected drop in US natural gas stocks.
US crude fell 61 cents to US$57.53 a barrel by 1544 GMT, after settling up US$1.17 yesterday. London Brent eased 50 cents at US$56.90.
US weekly natural gas stocks fell 186 billion cubic feet, the Energy Information Administration said. Analysts had expected stocks to decline by 200 bcf.
Oil prices have rebounded from a 20-month low of US$49.90 on Jan. 18 as cold weather -- albeit late in the northern winter season -- helped to draw down US distillate fuel stocks for the first time in nearly two months.
"We are getting some (investment) funds coming back now as there is enough strength in the market," said Gerard Burg, an analyst at National Australia Bank.
Data published on Wednesday showed US heating oil stocks dropped 3.4 million barrels last week. The National Weather Service has forecast below normal temperatures in the next two weeks, suggesting demand will stay strong.
Opec's latest production cut, of 500,000 barrels per day, took effect on Thursday, tightening supplies to the 85 million bpd global oil market.
The reduction is in addition to a 1.2 million bpd cut from November agreed by the group that pumps over a third of the world's oil. Together they should trim Opec supplies by around six per cent.
Royal Dutch Shell's annual results painted a gloomy picture of the oil industry in Opec member Nigeria. Shell, Nigeria's biggest foreign producer, has been hit hard by militant attacks that have shut a fifth of Nigerian output.
"This year, we still expect to have substantial volumes shut in," Shell's oil and gas chief Malcolm Brinded told reporters.
The strength of the US economy is central to the demand picture. The nation's output expanded at a robust 3.5 per cent annual rate in the fourth quarter.
But BNP Paribas analysts noted Wednesday's US oil stocks data showed a 800,000 barrels rise in diesel stocks, which could be a sign of slowing economic growth.
"The diesel numbers.. are tied to economic activity (diesel is used in rail and trucking of merchandise). (They) have been trending above their five-year range since the beginning of the year. The accumulation of inventory can be a precursor sign."
- REUTERS
