Oil holds firm as worries on heating fuels persist

Oil prices held steady above $53 a barrel on Wednesday as worries over a winter supply crunch countered expectations that high fuel costs would curb growth in petroleum demand next year.
US light crude for November delivery, which expires at the end of trade on Wednesday, gained 5 cents to $53.34 a barrel. December light crude was up 6 cents at $52.70.
Prices have lost more than $2 from the $55.33 record high struck on Monday on mounting evidence that this year's $20-surge may be starting to bite into economic growth and could dampen demand for oil next year.
But worries of tight winter fuels supply are keeping the market supported despite this week's falls.
"We started looking at forecasts that say high oil prices would hurt future demand, but it won't happen until next year," said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures.
"The market is now focused on heating fuel supplies, which are likely to be tight until December or January."
The US Energy Information Administration (EIA) will release its weekly report on the health of domestic commercial fuel stocks, and analysts expect key heating oil inventories to show a decline in the week to October 15.
A Reuters survey of 11 analysts predicted an average fall of 1.1 million barrels in distillate tanks, which include winter heating oil, marking the fifth-straight week of declines.
Stocks normally grow at this time of year, but Hurricane Ivan in September disrupted crude production and oil shipments in the Gulf of Mexico and hampered refining operations on the Gulf Coast.
About 25 percent, or almost 430,000 barrels per day (bpd) of oil production in the Gulf of Mexico remains shut, the US Minerals and Management Service said. Last week the EIA reported US heating oil stocks dropping by more than 1 million barrels to 50.0 million, 10 percent lower than year-earlier levels.
Heating oil supplies are also running low in other key demand centres such as Germany and Japan, the world's third-biggest oil consumer, where kerosene inventories are roughly 13 percent below a year ago.
Oil shipments into and around Japan were disrupted on Wednesday by a typhoon with six out of eight refiners reporting the suspension of shipping operations in southern, western and central areas of the country.