Oil surge steadies

Oil surge steadies

Reuters, London

High-flying oil prices gave back a small portion of rapid recent
gains on Wednesday as OPEC sought to assure traders it would not
let prices rise too high.

Even so prices held near US$51 a barrel, after rallying almost
6 percent on Tuesday spurred by frigid weather in the north and
sharp declines in the U.S. dollar.

U.S. crude oil prices eased 47 U.S. cents to $50.95 a barrel
after gaining $2.80 on Tuesday, the fastest rise in one session
since October 2000. London Brent crude slipped 41 U.S. cents to
$48.21 a barrel.

Prices eased on Wednesday after Kuwaiti Oil Minister Sheikh
Ahmad al-Fahd al-Sabah, also OPEC's President, said the group
would act to cool oil prices if they kept rising.

"If the prices rise further there will be a reaction from OPEC
to help lower these prices," said Sabah. The cartel next meets on
March 16 in Iran.

Oil prices have risen more than $5 in the last two weeks and
are within striking distance of the record $55.67 a barrel hit
last October.

Traders said there was some risk of profit taking from the
huge move on Wednesday, but that generally prices looked well
supported in a new, firmer range.

"Oil has surged into a new paradigm above $50 where it spent
much of last October. Given the newfound interest within the
managed fund community, we look for a $50-$55 range now," wrote
brokerage Refco in a report.

Demand for heating fuel in the U.S. Northeast, the world's
biggest heating oil market, was forecast to be 5.9 percent above
normal in the week to Feb. 26, the U.S. National Weather Service
said.

A falling U.S. dollar, which suffered its biggest daily
decline in two months against major currencies on Tuesday, also
sparked fund buying and drove oil prices higher.

The dollar recouped some losses against the euro and the yen
on Wednesday after Seoul said plans to diversify its foreign
exchange reserves did not mean it would sell the U.S. currency.

OPEC has been keeping a close watch on global stockpiles to
ensure that an overly large build does not send prices sliding
when demand eases after the northern winter.

Lower supply forecasts from non-OPEC producers -- especially
Russia -- have signaled a heightened need for OPEC's oil,
particularly with demand running stronger than expected.

U.S. crude oil supplies are expected to rise 500,000 barrels
for the week to Feb. 18 this week, a preliminary Reuters survey
of eight analysts found, which would be a rise for the second-
straight week.

But the analysts also expected a 1.7 million-barrel drop in
distillate stocks.