up near 57 dollars

Oil jumps over $56 on stockpile worries
Cold weather in United States, world's top heating fuel consumer, likely to have reduced distillate inventories.
January 30 2007: 1:48 PM EST


LONDON (Reuters) -- Oil climbed more than two dollars Tuesday, on forecasts for a fall in distillate stocks in the United States after consumers burned more heating fuel in cold weather.

The market recovered from a slide of more than $1 on Monday amid aggressive selling across the commodities complex.

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U.S. light crude jumped $2.49 to $56.55 a barrel after falling $1.41 on Monday. London Brent crude rose $1.63 to $55.31.

The cold snap is likely to have reduced U.S. distillate inventories, including heating oil, by 2.2 million barrels last week, analysts said in a Reuters poll.

Crude stocks were forecast to rise by 1.3 million barrels when the government next releases inventory data on Wednesday.

Exxon drilling very close to home
After exceptionally mild temperatures, recent colder weather has helped prices recover some ground after dipping to a 20-month low on Jan. 18 of $49.90 a barrel, but oil is still down 11 percent so far this year.

The market has mostly traded in a range of $50-$56 a barrel range for the past three weeks and was showing little sign of breaking out, analysts said.

February OPEC cut
OPEC producers were set to reduce supply to world markets by 500,000 barrels per day from Feb. 1 and investors were looking out for signs of those cuts.

Some analysts have said the cuts would be enough to prevent further rises in commercial crude inventories when demand falls in the Northern Hemisphere spring.

"The bottom line seems to be that they are taking oil off the market, although that doesn't mean the cuts are extremely bullish for oil," said Mike Wittner, analyst at investment bank Calyon.

"OPEC needed to do it [cut] to match lower crude demand. I think the market is supported in the mid-$50s level. I don't have anything too bullish on the horizon over the next 30-60 days."

Other market participants remain unconvinced that OPEC has cut enough crude to balance the market.

"The OPEC picture has been blurry for the last three months," Olivier Jakob of Petromatrix said in a report. Only weekly U.S. crude stock data would give the full picture of how much oil the group has taken off the market, he said.

Prices were further dampened on Monday by news OPEC member Nigeria would boost supplies in March. Nigeria has struggled to maintain exports because of militant attacks on its oil infrastructure.

Nigeria's oil exports were expected to climb to a 14-month high of 2.21 million barrels per day (bpd) in March, from 1.8 million bpd in February, which traders attributed to a backlog in shipments following attacks last month.

OPEC agreed in October to curb output by 1.2 million bpd or 4 percent from Nov. 1, and by an additional 500,000 bpd on Feb. 1.


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