SINGAPORE, Feb 4 - Oil prices were steady on Wednesday, ahead of the latest snapshot on the U.S. energy market that is expected to reflect strong demand for heating oil following freezing temperatures. U.S. light crude for March was trading at $34.30 a barrel, up 20 cents, as dealers prepare for the U.S. oil data due later in the day and OPEC's meeting to review output policy. Prices have drifted down from a 10-month high of $36.37 traded in January as oil dealers started to factor in the end of the U.S. winter season and how OPEC might respond to stubbornly high oil prices at a meeting scheduled in Algiers next week.
Oil brokers said March crude would struggle to get above $35 a barrel unless U.S. government data later on Wednesday provide any surprises. "Every time when the market breaks above $35 a barrel, there will be profit-taking," an oil broker said.
The data are expected to show that U.S. distillate stocks, which include winter heating oil, fell more than three million barrels last week as home owners and businesses rushed to combat sub-freezing temperatures in the U.S. Northeast, the biggest heating oil market in the world. Crude stocks, slumped at 28-year lows, are expected up just 600,000 barrels, and gasoline supplies, running 6.6 million below a five-year average, are expected to show a decline of 1.1 million barrels. Analysts said worries about falling heating oil stocks were fading since the U.S. winter had passed its mid point, but the data would reinforce worries U.S. oil supplies could remain tight in coming months when refineries try to crank up gasoline output in preparation for the summer driving season.
The ability of U.S. refineries to build stocks could depend on the Organisation of the Petroleum Exporting Countries' output policies. Several OPEC ministers have said in recent days the cartel, that controls half the world's crude exports, is likely to agree on February 10 to leave its official output ceiling of 24.5 million barrels per day unchanged. But the group, worried that world oil demand will fall in the second quarter as rising temperatures in the northern hemisphere reduce oil demand, plan to meet again on March 31.
OPEC President Purnomo Yusgiantoro, who is also Indonesia's oil minister, said earlier this week the Algiers decision was not a foregone conclusion. "We will watch price developments carefully because currently the oil price is falling slightly. So we will see how far the price drops because that will influence our decision," he told reporters in Jakarta. OPEC's reference crude price stood at $29.06 per barrel at its latest reading on Monday, above the group's preferred trading range of $22 to $28.//