SINGAPORE, Dec 29 (Reuters): Oil prices were steady today after sharp gains the previous day on forecasts of drops in US crude and distillate product stocks and on expectations that OPEC will cut output at its January meeting.
US light crude for February was trading three cents up at $59.85 a barrel today, after jumping $1.66 Wednesday. London Brent crude was five cents up at $57.69 a barrel, after gaining $1.35 the previous day.
The market was bolstered by forecasts that US government data due Thursday will show an 800,000 barrel drop in US crude stocks and a 700,000 barrel fall in distillate inventories last week, according to a Reuters poll of analysts.
The weekly data will be released one day later than usual because of the Christmas holiday.
Both crude and distillates, including heating oil, are in surplus over last year. The expected drop in distillate stocks could be tempered by milder weather this week in the US Northeast, the world's largest heating oil consuming region.
Overall US heating fuel demand is forecast to be about 28 per cent below normal in the week to Dec. 31, with heating oil demand in the Northeast region about a quarter less than usual, the US National Weather Service said.
Fund investors have helped drive oil's rally amid worries over tightly stretched supplies as demand grows in big consumers such as the United States and China.
Growing expectations that producers cartel OPEC will cut production when it meets at the end of January added support.
OPEC heavyweight Iran viewed a one million barrel per day cut by the cartel as a "good figure" when the cartel meets on Jan 31, the country's oil minister said in a newspaper interview Wednesday.
OPEC is likely to decide to cut production from the second quarter of 2006 on expectations the call on its oil will decline by 2 million barrels per day, OPEC president Sheikh Ahmad al-Fahd al-Sabah said Monday.
The cartel, which agreed earlier this month to defer any output cuts until next year, has been pumping near full throttle this year in a bid to quell high prices, which hit a record over $70 in August and are 38 per cent up since the end of last year.
Worries over crude supplies from Nigeria eased after Royal Dutch Shell said it had restored most of its production after pipeline attacks last week.