US oil prices held above $54 a barrel on Thursday after a larger-than-expected decline in heating fuels in the United States heightened fears of a winter supply crunch.
US light crude slipped 2 cents to $54.39 a barrel, less than $1 below the all-time peak at $55.33 on Monday. London's Brent crude rose 3 cents to $50.55 a barrel.
Prices surged to near-record levels on Wednesday after a US government report showed a fifth fall in as many weeks in heating oil inventories at a time when stocks would normally be building.
Heating oil supplies are also running low in other key demand countries, such as Germany and Japan. "Inventories have been drawing down and we are heading into winter.
All the ingredients are in place for the market to go up," said Tony Nunan at Mitsubishi Corp in Tokyo. The Energy Information Administration (EIA) reported a drop in US distillate stocks, including heating oil and diesel fuel, of 1.9 million barrels to 119 million barrels in the week to October 15., 12.6 million barrels below year-ago levels.
For heating oil alone, inventories fell 500,000 barrels to 49.5 million barrels, leaving an annual deficit of almost 7 million barrels.
US distillate consumption is running 4 percent above this time last year as solid US economic growth drives diesel demand. The data pushed heating oil futures in New York to a new record at $1.565 a gallon.
"It leaves us especially vulnerable in heating oil. It will be very difficult to be able to supply everyone if we get cold front," said Phil Flynn, an analyst at Alaron Trading in Chicago.
Evidence has mounted this week that this year's more than 60 percent surge in oil prices is starting to bite into economic growth and could dampen petroleum demand next year.
The European Commission will revise downward its 2005 economic growth forecast because of soaring oil prices, Economic and Monetary Affairs Commissioner Joaquin Almunia said on Wednesday.
But signs are emerging that oil demand growth in China, which has been running in double digits this year, may be slowing.
Crude oil imports by the world's second-biggest user increased by only 5.7 percent in September versus last year, although over the first nine months of this year supplies have surged by more than a third compared to 2003.