LONDON – Oil prices edged higher Thursday, recovering from a slide to their lowest level this year after U.S. government data showed a fall in stocks of winter heating fuel.
But a big rise in overall crude stocks and OPEC indecision over an output cut limited gains.
U.S. crude settled 27 cents higher at $57.86 a barrel, above a session low of $57.22, which was the lowest level since Dec. 19, 2005. London Brent crude settled 11 cents higher at $58.76.
U.S. government data Thursday showed crude stocks had risen 2.4 million barrels last week, compared with a forecast for an 800,000-barrel increase.
Distillate stocks fell by 1.6 million barrels, compared with expectations for a small rise. But distillate stocks, including heating oil, are still 22.7 million barrels, or around 18 percent, higher than a year ago.
"This is still a report indicating a well-supplied market," said Jason Schenker, analyst at Wachovia Bank. "We look well-supplied and I would not anticipate any shortages. We would need a very cold winter to see prices spike."
Distillate demand has already been sapped by warm weather and U.S. government forecasters said this week they expected warmer-than-average temperatures across much of the world's top oil consumer for the winter season.
In the face of plentiful supplies, OPEC ministers have agreed markets are oversupplied by around one million barrels per day (bpd).
But they have disagreed on whether to make a reduction from a notional 28 million-bpd production ceiling or from actual supply of nearly 27.5 million bpd in September.
They have also been divided over whether to hold an emergency meeting to formalize what would be OPEC's first output cut since 2004.
A source familiar with the situation said Thursday OPEC was considering holding a meeting in Vienna in early November.
"Speed is of the essence more than anything else -- dithering to date has cost them credibility," said Tobin Gorey, commodity strategist at Commonwealth Bank of Australia. "Actual output will of course have to fall to have an impact on actual prices."
U.S. Energy Secretary Sam Bodman said major non-OPEC oil producing nations could replace any crude supplies OPEC cuts and pick up market share in the process.
Some analysts say prices could fall further with or without an output cut, as lower OPEC production would increase spare capacity, meaning the group would be better able to cope with any unexpected supply disruption.
"Low spare capacity has been a big driver of prices this year," said Eoin O'Callaghan of BNP Paribas.
He said there were also concerns about the health of the U.S. economy, which could lead to reduced demand.
China's crude oil consumption, however, is robust, after customs data on Thursday showed its crude imports in September jumped 24 percent from a year earlier to a record high of 13.46 million tonnes, or 3.28 million bpd.
China's consumption has been boosted in part by the fact it has started building up emergency stockpiles.