Oil prices steadied above $45 a barrel on Thursday, attempting to put a floor under a 7.4 percent tumble after a big increase in US heating oil stocks eased worries of a winter supply squeeze. US crude oil futures were up 5 cents at $45.54, barely denting the previous day's $3.64 a barrel rout, the biggest single-day fall since September 2001. The market is more than $10 below its October all-time high. London Brent was up 4 cents at $42.35 a barrel after having dropped $3.20 on Wednesday.
Oil is hovering near its lowest level in two and a half months after a US government agency report on Wednesday showed distillate stocks, including heating oil and diesel, rose 2.3 million barrels in the week to November 26 to 117.9 million barrels.
A one-million-barrel build in heating oil stocks alone narrowed their supply deficit versus 2003 to 14 percent. Analysts have for weeks been expecting stocks to rise as refineries ramp up runs after maintenance and unusually mild winter weather in the US Northeast limits demand.
"It was always coming, but I don't see a total breakdown (in price)," said Tony Nunan, a manager at Mitsubishi Corp's international petroleum business. The US Energy Information Administration (EIA) said in a separate report oil prices were not likely to fall much further, averaging between $45 and $50 a barrel this winter.
"I believe $45 will be the floor because the winter weather hasn't come yet," Nunan said. "There's also the chance that Opec will show some restraint now that prices have come down."
Several forecasters expect temperatures to fall below normal in the Northeast in the New Year, lifting demand.
Most Opec members have thus far said they expected to leave output policy unchanged when the group meets in Cairo next week. "I think we will maintain the situation as it is," Algerian Energy and Mining Minister Cahokia Knell said on Wednesday, adding the cartel would not be concerned about the price fall.
But number two producer Iran has advocated cutting back supplies in excess of quotas throttling back the biggest output boom in 25 years to thwart a potential counter-seasonal build in crude stockpiles this winter.
On Wednesday's US data put crude stocks up 900,000 barrels, 3.5 percent higher than a year ago. Cartel earnings have also been hit by the weaker US dollar, which has fallen to a succession of life lows versus the euro, and big discounts for its mainly heavy, sour exports.
The group's basket price this year has been about $10 a barrel below US futures.
Many cartel members advocate raising the basket price target from $22-$28 to nearer $30-$35 a barrel.