Oil prices edged below $49 a barrel on Wednesday as traders looked ahead to an expected build in weekly US inventory data that would help bolster the thin supply cushion ahead of peak northern winter demand. US crude oil futures were down 20 cents at $48.93 a barrel, having slipped 53 cents on Tuesday to end a five-session streak that had boosted prices by $3.50. Since the start of the year prices are still up 50 percent.
Dealers will look to the US government report later in the day for direction, with analysts expecting a 1.4 million barrel increase in supplies of distillates, including winter fuel heating oil, a Reuters poll show.
"Refiners will have the opportunity over the next few weeks to build up product stocks now that maintenance is well passed," said David Thurtell, commodities strategist at Commonwealth Bank of Australia.
"But if not then we could be going back over $50 with the first cold snap." The weather in the US Northeast the biggest heating oil market in the world has thus far been mild, but forecasters are expecting a colder-than-usual season in the months ahead, which would cause usage to climb.
Global production disruptions have helped support prices lately but healthy US inventories, swelled by near full-throttle Opec output, have limited gains. Crude stocks are expected to rise 700,000 barrels on Wednesday's report due, the poll found.
Disruptions in the UK and Norwegian North Sea have shut 280,000 barrels per day (bpd) of production since the weekend, while Canada's 165,000-bpd Terra Nova platform has been out of commission for 10 days due to a leak.
And the gradual recovery of output in the US Gulf of Mexico since September's Hurricane Ivan has stalled over the last four weeks, with nearly 200,000 bpd still shut in. Rapidly rising world demand has left little spare capacity in the world supply system, magnifying the impact of disruptions.
The sliding US dollar has also offered oil a measure of support as Opec producers have often cited weakness in the greenback as an excuse for keeping oil prices higher, protecting their purchasing power in Europe and Asia.
"The main influence at the moment holding oil a bit higher than it would is the weaker US dollar," said Thurtell. "There may be more pressure from some Opec quarters to cut back earlier than they might otherwise have done."
Second-biggest cartel producer Iran has said the group should crack down on excess output over self-imposed quotas when Opec meets in Cairo on December 10, but other members have been reluctant to back a cut with US oil hovering near $50.