LONDON (Reuters) - Oil prices steadied just after midday Wednesday after a government report showed a pre-winter rise in oil product inventories, which balanced out a sharp fall in crude oil stocks.
Around 12:10 p.m., NYMEX light crude oil futures slipped a penny $31.75 a barrel. London Brent crude oil futures fell 10 cents to $29.26 a barrel.
Prices had eased after the U.S. Energy Information Administration reported a one million barrel increase in distillate fuel stocks, including heating oil, ahead of the northern winter.
The news countered data, which initially took prices briefly higher, showing that crude stocks fell by 6.4 million barrels last week. At 277.9 million barrels, U.S. crude oil inventories are 25.2 million barrels less than the five-year average for this time of year, the EIA said.
"The big thing was that products stocks were up at expense of crude," said Jim Ritterbusch, president of Ritterbusch and Associates. "The good news is we're building products supplies; the bad news is crude supplies are back down toward historic low levels."
Oil prices have risen more than 7 percent in little more than two weeks, forced higher by heavy snow in the northeast United States. Weather forecasters said the U.S. will see warmer-than-normal temperatures by Thursday after the weekend storm.
Saudi Arabian Oil Minister Ali al-Naimi said Wednesday that higher oil prices are justified by the dollar's fall in value against other major currencies.
"The level of the dollar is a concern, that's all I can say," Naimi said.
Naimi's comments reiterated his stance at last week's OPEC meeting, when he said the dollar's losses against the euro and the yen justified a price of around $28 for OPEC's oil.
Oil prices have risen around a dollar since that meeting and OPEC's reference crude price was last valued at $29.73 a barrel, well above the cartel's $22 to $28 target range.
The Organization of the Petroleum Exporting Countries, which controls half the world's crude exports, agreed last week to leave production rates unchanged for now and to meet again Feb. 10.
OPEC signaled it might cut production in February to counter a seasonal second quarter decline in fuel demand following the northern winter.
The International Energy Agency said Wednesday that robust world economic expansion, led by China, is fueling faster-than-expected oil demand growth
In its monthly Oil Market Report, the Paris-based IEA raised its forecast for incremental world petroleum consumption for this year and 2004, the third time it has revised up the projections in four months.
The growth forecast for 2003 was lifted by 160,000 barrels to 1.44 million barrels per day on the 78.4 million barrels per day world oil market. In the summer the IEA was projecting extra demand this year of just one million barrels daily, reflecting a cautious outlook for the world economy.
Growth in Chinese oil demand continues to exceed expectations, but the IEA said the strain on China's energy infrastructure could put a brake on economic growth next year.
-- Reuters contributed to this story.
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