Oil prices rise for second day in a row
Oil prices rose for the second day in a row on Thursday with an Arctic blast forecast to hit the United States next week, ramping up demand for heating fuels.
OPEC ministers gathering in Cairo ahead of Friday's policy meeting were preparing to discuss whether to rein in excess supplies that have helped replenish global inventories and knock prices from record peaks above $55 a barrel.
U.S. light crude rose 13 cents to $42.07 a barrel after briefly touching a four-month low at $40.45 on Wednesday.
Prices, which have dropped a little over $13 since striking the all-time high $55.67 on Oct. 25, have also been dragged lower by mild weather in the United States that has dampened demand so far for heating fuels.
London's Brent crude rose 34 cents to $39.03 a barrel.
"The fact that the market held $40 yesterday is encouraging. We rallied off relatively neutral data, which may indicate that we are close to the bottom," said Tony Nunan at Mitsubishi Corp. in Tokyo.
U.S. government oil supply data on Wednesday showed a smaller-than-expected increase in national distillate inventories, which include winter heating oil and diesel.
The Energy Information Administration (EIA) said in its weekly report that distillates stocks rose by 1.4 million barrels in the week to Dec. 3, slightly lower than market forecasts for a 1.6-million-barrel rise.
Heating oil stocks rose 100,000 barrels but remained more than 13 percent below year-earlier levels ahead of peak winter consumption, the EIA said.
But weather forecasters AccuWeather predicted on Wednesday an Arctic cold front next week would bring "bone-chilling temperatures" to the Great Lakes region and the U.S. Northeast, the world's biggest heating oil market.
OPEC oil producers have been sizing up how fast they should curb excess supply following oil's tumble in the last six weeks, which has cut prices by almost a quarter.
"The OPEC basket is still $33, the winter has not even started in the (U.S.) northeast. The winter is coming, our (target price) band is still $22-$28, so why should we do anything?" Saudi Oil Minister Ali al-Naimi said on Wednesday.
OPEC's 10 member nations with production quotas have been pumping about 1 million barrels per day (bpd) above official output limits of 27 million bpd to stem this year's price rally.
The Organization of the Petroleum Exporting Countries meets in the Egyptian capital on Friday and many members are concerned that the surplus supply will drag prices down too far.
"We should be very careful with the market situation and especially the severe drop that we have received in recent days," said Iranian Oil Minister Bijan Zanganeh.
OPEC's biggest task is to gauge how aggressively it can act to bolster prices without endangering world economic growth, which is expected to slow next year.
So far oil demand has proved resilient to this year's price surge, but some economists warn the full impact of high energy bills will not show through for another six months and a spell of lower prices would at last help protect global growth.