Oil prices clung near the $49 mark on Tuesday, pausing from a 12 percent slide from record highs ahead of key mid-week data on the health of winter fuel stockpiles in the leading consumer, the United States. US light crude gained 1 cent to $49.10 a barrel, more than $6.50 below the all-time peak at $55.67 struck on October 25 at the height of concerns over a possible winter supply crunch.
This week's data from the government Energy Information Administration (EIA) is expected to show a rise in US crude inventories for the seventh week in a row, but levels of distillate stocks, which include heating oil, remain a worry.
"US distillate stocks remain extremely low; they are at the lowest in five years at 115.7 million barrels. The funds' return to long positions therefore depends on how severe this winter is," said Frederic Lasserre at Societe Generale in Paris.
Oil's slide in the last 10 days saw hedge funds cut their net long positions to the lowest level in a year in a switch to other financial markets, particularly equities.
A preliminary survey by Reuters of eight analysts, forecast on Monday that US crude stocks would rise by 2.1 million barrels in the week to November 5 when the EIA releases its weekly report on Wednesday.
Any increase would be despite continued disruptions to output in the US Gulf of Mexico, which is still recovering from damage from Hurricane Ivan in September.
As of Monday, Gulf of Mexico crude production remained at 87.5 percent of the normal rate of 1.7 million barrels per day (bpd).
The Reuters survey also predicted a slim rise in distillate stocks of 400,000 barrels, which includes key winter heating oil.
"The next two weeks are key, $55 will be easy to touch if people think demand in the winter season will be strong," said Tony Nunan at Mitsubishi Corp in Tokyo.
Cold weather in the US Northeast, the world's biggest regional heating oil market, could send prices shooting up by stretching tight supplies, although by the same token sustained mild weather would ease much of the pressure, analysts said.
The threat of instability in the Middle East and potential supply disruptions from the oil-rich region, as well as a looming strike in Nigeria could also help push prices back up to records.
Nigerian authorities have threatened to sack workers who join next week's planned general strike over rising fuel prices, which unions say may hit oil supplies from the world's eighth-largest exporter. Nigeria pumps about 2.4 million bpd.
Edmund Daukoro, Nigeria's Presidential Adviser on Petroleum, predicted on Monday that US oil would stay between $45 and $50 a barrel in the near term.
"The immediate thing that is visible... is progress in Iraq," Daukoro told Reuters. "As long as that remains on the boil, I don't see a big drop now in price."
US Marines and Iraqi troops launched on Monday a full-scale assault on the rebel stronghold of Falluja, while Baghdad saw the biggest wave of bombings in the capital in weeks.
Shipping sources said on Monday the flow of Iraqi Kirk crude resumed at the weekend to Turkey's Mediterranean port Ceyhan and was running at about 400,000 bpd after repairs to a key pipeline that was blown up by insurgents last week.
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