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.