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Oil trades near 18-month low on supply forecast, mild weather

Crude oil was little changed near an 18-month low in New York on speculation mild weather in the US Northeast and rising fuel stockpiles will curb demand from refiners.

A US government report today will probably show gasoline and distillate stockpiles in the world's biggest oil consumer rose for a fourth week as reduced heating demand freed refiners to make motor-fuel, according to a survey of analysts. OPEC will bring forward a 500,000 barrel-a-day output cut by three weeks to stem sliding oil prices, Qatar's oil minister said yesterday. „Refinery production is stable so the inventories are accumulating,” said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures Ltd. in Tokyo. „Even OPEC doing production cuts won't have any impact in the market.” Crude oil for February delivery was at $55.54 a barrel, down 10 cents, in after-hours electronic trading on the New York Mercantile Exchange at 12:50 p.m. in Singapore. The contract fell 45 cents, or 0.8%, to $55.64 a barrel yesterday, the lowest close since June 15, 2005.

Futures rose from a low of $53.88 after the Qatari announcement. Prices have fallen 8.7% this year and are down 12% from a year ago, as mild weather in the US Northeast erodes heating oil demand and on doubts OPEC can enforce two production cuts agreed the past three months. The group, which pumps about 40% of the world's oil, has cut output by about 795,000 barrels a day since it announced a 1.2 million-barrel reduction starting November 1. In London, Brent crude oil for February settlement was up 4 cents at $55.22 a barrel in electronic trading on the ICE Futures exchange at 11:33 a.m. Singapore time.

Demand in the US Northeast, which accounts for 80% of the nation's heating oil consumption, will be 24% below normal in the week ended January 16, Belton, Missouri-based forecaster Weather Derivatives said yesterday. „You've got less consumption in the Northeast” and stockpiles will be up, said Mark Waggoner, president of Excel Futures Inc. The Organization of Petroleum Exporting Countries is „definitely cutting back. How much is the question.” US distillate inventories, including heating oil and diesel, probably rose 2 million barrels last week from 135.6 million barrels the week before, according to the median estimate from a Bloomberg News survey of 14 analysts.
Gasoline supplies probably climbed 2.5 million barrels from 209.5 million, while crude oil stockpiles probably fell 1.5 million barrels from 319.7 million a week earlier, according to the survey. Even with mild weather, oil's $1.76 climb from its low yesterday demonstrates the strong buying support from investors at any price below $55, Excel's Waggoner said. US gasoline demand averaged 9.3 million barrels a day in the four weeks ended December 29, up 0.5% from a year earlier, the Energy Department reported last week. (Bloomberg)