Oil prices held firm on Friday near the $55-a-barrel mark as traders worried time is running out to top up low heating oil inventories before winter. U.S. light crude rose 7 cents to $54.83 a barrel after setting a new all-time high on Thursday of $54.88. London Brent crude gained 4 cents to $50.13 a barrel. "It doesn't really matter where prices are -- so long as supply-demand fundamentals remain tight and inventories remain low prices will stay strong or strengthen,"said London energy consultant Geoff Pyne. "High prices have had little effect on demand so far." Oil is up $20 in less than four months, lately spurred on by a U.S. Gulf of Mexico production outage that has exacerbated a global shortage of light, low-sulphur crude that is easy to refine for transport and heating fuels. About 470,000 barrels per day (bpd) of crude production remains shut more than a month after Hurricane Ivan with some losses expected to linger beyond the end of the year, the government's resource agency said this week. That shortfall has impeded refiners' ability to build up U.S. heating oil stocks which at 50 million barrels are 10 percent below last year, weekly government data showed on Thursday.
U.S. heating oil futures set a new record of $1.5508 a gallon on Friday. Supplies in the U.S. Central Atlantic region, a major heating oil distribution point for the heavy consuming U.S. Northeast, are running well below average. "If, indeed, heating oil inventories have peaked for this key region, then there is little likelihood that heating oil prices will ease significantly this winter," the Energy Information Administration said on Thursday. The shortage is also evident in other major regions, with consumers in Germany, Europe's biggest market, keeping supplies of heating oil well below last year due to high prices.
German end-user tanks were only 60 percent full at the start of this month versus 68 percent last year, traders said, while in Japan, the world's third-biggest energy user, kerosene supplies are more than 15 percent below last year. As fears of a winter fuel squeeze dominate traders' near-term perspective, some see signs emerging that China's massive oil thirst -- a major factor in this year's price spike -- could slacken as the government moves to prevent the booming economy overheating. Double-digit oil demand growth from China, now the world's second-biggest importer, took the world by surprise this year, stretching OPEC supplies to the limit. The International Energy Agency said this week that increased costs were encouraging conservation measures in China and fuel switching away from oil. But high prices appear to have done little so far to deter demand from the fast-growing Indian economy. State Indian Oil Corp said on Friday its crude imports in the fiscal year 2005-2006 were likely to rise 12 percent to 37 million tonnes. ///