Oil Hovers around $63

U.S. crude oil futures briefly pierced $63 a barrel in early afternoon trading, rebounding from losses as traders positioned themselves ahead of weekly inventory data due Wednesday.

Forecasts call for a small draw in distillates and low-volume increases in crude and gasoline stocks, according to a poll of industry analysts by Reuters.

The prospect of another production cut when OPEC ministers meet next week in Abuja, Nigeria, was also supportive, traders said.

OPEC ministers meet next week in Abuja, Nigeria, with many in the group saying they favored another production cut, following a 1.2 million barrel reduction agreed in October and which began to be implemented on Nov. 1.

Oil ministers say they favor a further oil cut of 500,000 to 1 million bpd. Any further output reduction in Abuja would probably also be made from actual supply, OPEC sources said.

Earlier in the session, prices slipped on mild weather forecasts for next week after the current cold snap and a weak U.S. cash gasoline market, traders said.

The strengthening dollar was also a factor in the early drop in prices, analysts said.

"Volume is light at the moment and that seems to be exaggerating crude's moves here," said a NYMEX floor trader.

In London, ICE January Brent crude gained 16 cents to $63.61, after moving $62.61 to $64.20.

U.S. distillate stocks, which include heating oil and diesel fuel, were forecast to show an average 400,000 barrel draw when the U.S. Energy Information Administration releases its data for the week to Dec. 1 on Wednesday at 10:30 a.m. EST.

Analysts in a preliminary Reuters poll also forecast an average build of 400,000 barrels in crude stocks and a 300,000 increase in gasoline stocks.

The dollar advanced against the euro on Tuesday and pared losses against the yen after a report showing the strongest reading on the U.S. service sector since May countered recent
signs of a rapidly slowing economy.

On other economic news, the U.S. Institute for Supply Management's non-manufacturing survey, showed a reading of 58.9 in November, economists expected a reading of 56.0.

News that Saudi Arabia cut the January official selling price for its crude to Europe at Sidi Kerir by 10 cents according to trade sources, acted tp pressure crude futures earlier.

The early rise in crude prices was supported by news that China imported about 8.2 million barrels of crude oil for its strategic storage tanks in November, more than double expectations.

The entire United States was expected to warm to above-normal temperatures by this weekend and remain above normal for at least the next two weeks, according to the National Weather Service.

The NWS six-to-10-day outlook issued Sunday showed nearly the entire nation ranging above normal. Private forecaster DTN Meteorlogix's six-to-10-day forecast for the region on Tuesday called for temperatures to be near to above normal.

NYMEX January heating oil was see-sawing , after earlier rising as high as $1.825. It posted the day's low at $1.782.

NYMEX January RBOB pared losses after hitting $1.6875 earlier.


NYMEX January crude's support was pegged at $62, with next target at Monday's low of $61.90. Resistance remains at $64.

Heating oil's support lies at $1.79 and the next chart low is $1.727. The crack spread was steady near $13.20.

RBOB support is at $1.65, and the next low is at $1.599, hit on Nov. 28. Gasoline support fell back at $1.654, the next low at $1.5850, the Nov. 28 low. The crack spread slipped further to $6.85.