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Thu 30 Dec 2010 01:03 PM

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Oil up slightly ahead of US inventory data

US weekly inventory data expected to show a draw-down in crude stocks for the fourth consecutive week

Oil up slightly ahead of US inventory data
BLACK GOLD: Analysts expected a 2.6 million-barrel drop in crude inventories last week, which would be the fourth straight drawdown in the worlds largest oil user (Bloomberg Images)

Oil rose further above $91 on Thursday, ahead of US weekly inventory data expected to show a drawdown in crude stocks for the fourth consecutive week due to an abnormally icy winter.

US crude for February delivery climbed 21 cents to $91.33 a barrel by 0720 GMT. Prices have traded in a tight range near $91 since hitting a 26-month high of $91.88 on Monday.

ICE Brent crude rose 18 cents to $94.32.

"The oil market continues to alternate small gains with small declines, as prices idle quietly on light between-holiday volume," said Timothy Evans, energy analyst at Citi Futures Perspective.

The oil market may get the impetus it needs to break through its trading range with the release of the US Energy Information Administration fuel stocks report later on Thursday.

Analysts expected a 2.6 million-barrel drop in crude inventories last week, which would be the fourth straight drawdown in the world's largest oil user.

Gasoline stocks were forecast up 1.4 million barrels, while distillates fell 600,000 barrels, a Reuters poll found.

Industry group American Petroleum Institute (API) confounded analysts expectations on Wednesday by reporting a 3.1 million-barrel rise in crude, while gasoline supplies dropped 3.1 million barrels in the week to December 24. Distillates rose 1.4 million barrels.

"The API data is certainly known to be more volatile than the more definitive EIA report, so we would wait to see those numbers before making any big decisions," Evans said.

WEAKER DOLLAR, WARMER WEATHER

Oil prices were supported by a weaker dollar, which hit a seven-week low against the yen and a 28-year trough against the commodities-linked Australian currency after traders took falls in US bond yields as a cue to sell the greenback.

Oil and dollar-denominated commodities often move inversely to the dollar. A weaker US currency typically lifts oil prices as it lowers the value of dollars paid to producers while making it less expensive for oil consumers using other currencies.

Bullish sentiment was limited by forecasts for warmer weather this weekend in the US Northeast, which would curb fuel demand in the world's top heating oil market. The region was slammed by one of the worst blizzards on record over the Christmas holiday.

Technicals indicated oil prices may surge to $92.50 after ending its consolidation period.

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