Oil prices edged up toward $48 a barrel on Friday as worries that or severe winter could stress low winter fuel stocks helped staunch the market's $8 tumble from record highs. US light, sweet crude was up 28 cents at $47.70 a barrel, attempting to end a slide that has taken more than 14 percent off the October 25 all-time peak of $55.67. Prices have bounced around the $47 to $49 range for the past three days.
An exodus by speculative funds cashing in their oil profits to seek returns in resilient equity and bond markets had knocked prices to seven-week lows, prompting traders to ask whether this year's explosive price rally had run its course.
Oil is still up nearly 50 percent from the start of the year, a rise fuelled by the fastest demand growth in a generation and supply disruption in major Opec and non-Opec producers. With the peak northern hemisphere winter still to come and demand running strong, analysts were reluctant to say that $50-plus oil was a thing of the past.
"We do think the worst is over, but a terrorist attack or major outage could see the price briefly revisit the October highs," said David Turtle, commodity strategist at Commonwealth Bank of Australia.
"And the weather in the northern hemisphere will be an important driver of prices." Heating oil supplies in major markets the United States, Germany and Japan are much lower than at this time last year, spurring fears of a supply squeeze if winter hits or hard.
The heavy consuming US Northeast is bracing for a blast of colder than usual weather at the weekend, according to forecasters Meteorlogix. Total US heating oil inventories are 17 percent below 2003 levels, government data showed this week.
In Germany, households and businesses have only stocked about 60 percent of their heating oil storage capacity, the lowest November level in at least 20 years. But analysts say stockpiles should begin rising quickly as refiners crank up operations.
US plants boosted processing rates by more than 3 percentage points last week. "With US and European refineries back from maintenance, product stocks will build, putting pressure on crude oil prices," Turtle said in a report.
US crude oil inventories have already been topped up to near 2003 levels thanks to the heftiest Opec output in 25 years, helping ease some anxiety ahead of the winter.
Speculative hedge funds have also fled the oil market this month amid signs that high energy costs are dulling economic growth and therefore chipping away at future oil demand, which surged this year at the fastest rate in a quarter of a century.
In Japan, the world's third-biggest oil consumer, the economy virtually ground to a halt in the July-September quarter, growing at a below-forecast 0.1 percent from the previous quarter.
And China, which surpassed Japan as the number two consumers this year, has instituted a series of measures meant to slow its breakneck economy to prevent it boiling over.
But uncertainty over some Opec supplies has left dealers edgy, with a Nigerian umbrella union set to go ahead with a general strike over higher domestic fuel prices from next Tuesday despite a court order not to proceed.
The action, the fourth this year, should not affect the country's over 2 million barrels per day exports unless it drags on longer than a week, industry unions said this week.
The ongoing battle between US troops and rebels in the Iraqi city of Phallus has also kept worries about the country's exports on the front burner, although Baghdad has managed to repair frequent attacks on its northern pipeline quickly.
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