NEW YORK – Oil prices held firm near $52 a barrel Tuesday as cold, snowy weather in the U.S. Northeast kept furnaces blazing, putting strain on already tight heating oil stockpiles.
U.S. light crude futures eased 7 cents to $51.68 a barrel on the New York Mercantile Exchange (search), 60 cents below a four-month peak of $52.28 struck Monday. London Brent crude rose 5 cents to $50.11 a barrel on the International Petroleum Exchange.
A blast of cold weather in the Northeast, the world's largest heating oil market, was expected to bring this week's demand for the key winter fuel 14 percent above normal, according to the National Weather Service (search).
U.S. heating oil inventories are already running about 7 percent below a year ago, even as stockpiles of crude oil and gasoline run at an 8 percent surplus, according to the latest government figures.
The Energy Information Administration (search) will release its new weekly inventory report Wednesday morning, with dealers anticipating further declines in distillate stocks, which include heating oil.
Traders said a tight global supply and demand balance and a weaker U.S. dollar has also attracted increased fund interest in recent weeks, keeping prices lofty.
"Commodities seem to be a rather popular alternative (to bonds, equities and the dollar) for funds searching for a trend," wrote Edward Meir of brokerage Man Energy.
"The energy complex has captured its fair share of interest, as evidenced by expanding open interest. Whether this growing level of interest can be rewarded by ever-higher prices remains to be seen," he added.
Headline $50 crude has led OPEC (search) oil producers to back away from talk of a possible output cut for the second quarter.
"The fact that we have over $50 oil may be softening the need to consider a cut," OPEC's acting Secretary-General Adnan Shihab-Eldin told Reuters Tuesday.
Kuwait, Qatar, Venezuela and Indonesia have come out in favour of keeping OPEC's formal output limits unchanged when the cartel meets in Iran March 16.
Shihab-Eldin has said the group sees a growing consensus that a $40-50 range is sustainable, backing up comments by Saudi Oil Minister Ali al-Naimi last week that prices could stay in that range this year.
Kuwait's Oil Minister said Tuesday he wanted OPEC's reference price to drop into a $28-35 a barrel range, as the group discusses how to rejig its oil basket to reflect its low-quality supply.
The group's basket of crudes was last valued at $46.26 a barrel — around $5 less than the front NYMEX price.