Oil ended a slide yesterday, firming up as cold weather in the US northeast promised higher fuel demand and sabotage in Iraq once again disrupted the country's exports.
US light crude was up 19 cents at $40.90 (€30.73) a barrel, after earlier falling to $40.25, the lowest price since the end of July. London's Brent crude was up 37 cents at $37.75 a barrel.
Temperatures in the US northeast, the world's largest heating oil market, were expected to be below normal for the next five days, ending a streak of mild weather that had helped fuel producers increase winter stockpiles.
While stockpiles of heating oil have been slowly rising, they remain about 13.5 per cent below the year-ago level, prompting concern in oil markets that supplies may be insufficient if the US winter is particularly cold. In Iraq, sabotage stopped the flow of oil through the country's northern export pipeline to the Turkish terminal of Ceyhan on Sunday.
The pipeline had just been restarted after a 12-day outage, continuing a stretch of sporadic flows since an explosion damaged the pipeline in early November.
Oil has been under pressure from the view that world crude stocks will be sufficient this winter, despite OPEC's decision on Friday to rein in one million barrels a day of excess output.
Saudi Arabia is earmarked to cut 500,000 bpd. Refiners in Japan and South Korea, Asia's second and fourth-biggest oil consumers, respectively, said yesterday that Riyadh had informed them that supplies would be chopped by 8 per cent in January.
Saudi sales to global oil companies also were reduced significantly, but traders said their companies requested lower supplies rather than having cuts imposed by Riyadh. "The point is the Saudis aren't imposing this cut. Customers are asking for less because the demand is not there," said Mr Nauman Barakat of brokers Refco.
"We're drowning in heavy, sour crude from OPEC, so that a 200,000-300,000-barrel-a-day cut from the Saudis is no big deal," he said.
Analysts said crude already produced and in transit would continue to bolster supplies for weeks to come, before the cuts take effect.
"It [ the market] is now waiting for the barrels to hit," said Ms Deborah White, senior economist at SG commodities. - (Reuters)
