Oil prices held just below $48 a barrel on Tuesday, as the market remained nervous that Opec producers may cut supplies before the end of the first quarter. US light crude dropped 21 cents to $47.99 a barrel, about $2 above on Monday's low when prices fell after Opec agreed at the weekend to leave output unchanged for now and Iraq's election passed without attacks on oil facilities. "Opec have certainly set the stage for oil in the mid-$40s up to $50 and they're still talking a possible cut.
It's extremely price supportive," said John Brady at ABN Amro in New York. "The funds are accumulating length. They're looking at oil and saying that it's not going down and there's upside potential."
The Organisation of the Petroleum Exporting Countries kept official production limits steady at 27 million barrels per day despite oil prices close to $50 a barrel, confident that higher fuel costs were not damaging global economic growth.
But the cartel left the door open to shaving production later to contain a second quarter stockbuild, which typically happens after the end of the northern winter.
Opec meets in Isfahan, Iran, on Mar. 16, but ministers could agree on an output cut by telephone before then.
"It depends on whether demand slows but I think they will have to do something. It is unlikely we will have a second quarter this year like last year when Chinese demand exploded," said Deborah White, senior economist at SG Commodities in Paris.
Opec will be watching US stockpiles carefully as the focus shifts away from low winter fuel supplies towards healthier crude and gasoline inventories ahead of the second quarter, when demand hits a seasonal low.
US crude oil inventories are running 9 percent above year-ago levels and gasoline stockpiles are up 3 percent, although fires at two US refineries have raised concerns over motor fuel supplies months before the peak summer season.
Analysts expect US crude inventories to rise 1.3 million barrels in the week to January 28 when the government Energy Information Administration publishes its weekly oil stocks report on Wednesday. If correct, US crude tanks will have risen for four straight weeks.
Analysts also forecast US distillate stocks, which include heating oil and diesel, to fall by 2.4 million barrels after a blizzard and cold snap hit the Northeast region, the world's largest consumer of winter heating fuels.
They predicted that gasoline stocks would show a counter-seasonal drop of 300,000 barrels, the second fall in as many weeks.