Oil: Prices firms as heating oil stocks slip

NEW YORK - Oil prices firmed on Wednesday after a government report showed a larger-than-expected decline in US heating oil inventories following a stretch of frosty weather in the Northeast.

US February light crude rose 31 cents to US$58.40 a barrel, while London Brent crude rose 41 cents to US$56.58.

The gains came after the US Energy Information Administration said commercial distillate inventories, including heating oil, fell by 2.8 million barrels last week due to a 9 per cent surge in demand and a slowdown in refinery activity.

The strength was limited, however, as the drop in refining helped boost the nation's crude stockpiles by 1.3 million barrels, leaving inventories more than 12 per cent higher than last year.

Analysts had expected the EIA report to show a decline in distillates inventories of only 400,000 barrels, along with a dip in crude inventories of 1 million barrels.

Refineries may be catching up on maintenance work that they had been unable to carry out earlier as they worked at full tilt to compensate for lost output from hurricane-damaged plants, analysts said.

"It looks like maybe some of the seasonal maintenance that was postponed a month or two ago because of the hurricanes," said Tim Evans, analyst at IFR Energy Services.

Heating oil stocks fell by 1.5 million barrels as US consumers burned more fuel to stave off icy conditions last week. But stocks remained some 5.6 million barrels higher than the same time a year ago.

Forecasts for warmer-than-usual weather for the first quarter of next year have eased worries that heating fuel stocks might be tested this winter and have pressured energy prices lower in recent days.

NIGERIA ATTACK

Prices rose earlier after an attack on a pipeline in Nigeria reduced oil output.

"It is not unusual to lose Nigerian supplies but headlines of armed men attacking facilities explains this little rally," said Deborah White, senior energy analyst at SG Commodities in Paris.

Nigerian authorities said on Tuesday that unidentified gunmen were suspected of blowing up a major pipeline, cutting output by 7 per cent from the world's eighth-largest exporter and major supplier to the United States.

A huge blaze continued to rage on Wednesday.

Royal Dutch Shell, which operates the pipeline, said it had closed two oilfields and shut in 180,000 barrels per day (bpd) of production in the southern Niger Delta, which pumps almost all of the Opec member's 2.4 million bpd.

- REUTERS