Oil prices edged higher for the second day today, recovering from a week-long $5 slump ahead of US inventory data expected to show a slight draw in distillates, which include winter heating fuel.
Lower-than-usual temperatures probably caused heating oil and diesel stockpiles to slide last week, a Reuters poll found, although they would still be in a double-digit deficit versus last year, keeping the market on edge.
US light crude oil futures were up 21 cents at $41.98 a barrel early this morning, building on yesterday's 45-cent rise.
London's International Petroleum Exchange (IPE) reopens for business today after a two-day break, with prices likely to fall several dollars in line with US markets.
Brokers said activity was set to be light this week with many traders away for holidays and big-money funds likely to have closed their books for the year, although the thin conditions could spur increased volatility.
Prices touched a two-week low of $41 on Tuesday, falling more than $5 in a week after rising US distillate inventories and milder weather forecasts eased winter supply fears.
Weekly government data due this afternoon is expected to show a drop of 700,000 barrels in distillate supplies in the week to December 24th, a Reuters poll of 11 analyst showed, as the first blast of cold weather hit the US Northeast.
The analysts also expected crude oil stocks rose by a modest 50,000 barrels, while gasoline increased by 500,000 barrels.