Singapore: Oil steadied above $91 a barrel on Wednesday, as forecasts for warmer weather in the US Northeast offset expectations for a further drawdown in crude stocks in the world’s largest oil user.
NYMEX crude for February delivery slipped 12 cents to $91.37 a barrel by 08:25 am, while ICE Brent crude fell 14 cents to $94.24.
US oil prices surged to a 26-month high of $91.88 on Monday, driven by unusually cold weather, rising appetite for risk assets and signals from Opec it would not arrest the rally.
“Oil is tracking the cold weather in the Northeast of the United States and also the dollar against the euro,” said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd.
Temperatures in the US Northeast were expected to warm by the end of the week, curbing demand in the world’s top heating oil market and providing relief to New York residents slammed by the sixth biggest snowstorm on record.
The icy weather has boosted distillate needs, which includes heating oil and diesel fuel, and US stocks were expected to have fallen 5,00,000 barrels last week, a Reuters poll showed.
Crude inventories in the world’s biggest economy were pegged to have fallen 2.9 million barrels, while gasoline stocks were seen up 1.5 million barrels.
The American Petroleum Institute is expected to report its weekly inventory data later on Wednesday, delayed by a day due to the Christmas holiday. The US Energy Information Administration (EIA) will issue its weekly report on Thursday.
Oil prices remained strong despite poor US economic data that dampened growing optimism for a recovery.
US consumer confidence unexpectedly deteriorated in December, while prices of single-family homes fell almost double the expected pace in October.
The dollar index, which tracks the greenback’s performance against a basket of major currencies, was largely unchanged at 80.288.
“This is an additional illustration that oil prices want to advance,” said Cameron Hanover in a research note. “Investors are especially keen to follow whatever factor is most supportive of prices moving higher.”
Evidence of this growing bullish sentiment was provided by a record high of net long crude oil positions on the New York Mercantile Exchange in the week to 21 December.
Technicals point to oil prices consolidating between $90.12 and $91.50, with a bias towards a drop to $90.12.
Oil also found support from heavy US holiday travel, which boosted retail gasoline demand by 4.6% last week. US gasoline futures rose 0.57 cents to $2.4101 a gallon.