Oil prices drifted around $47 a barrel on Wednesday, well off recent peaks as traders braced for another increase in US crude oil inventories. US light crude was down 12 cents at $47.00 a barrel, deepening on Tuesday's more than $1 drop. Prices have retreated swiftly from last week's high near $50, but have not broken free of the $46-$50 range for nearly three weeks.
Relief over Opec's decision at the weekend to maintain current production levels was curbed by warnings that the cartel could still act swiftly to cut production ahead of the second quarter, when winter demand ebbs, traders said.
Forecasts for a fourth consecutive build in this week's US crude oil inventories already sitting 9 percent higher than a year ago added weight to the bearish bias, they added. "The Opec meeting and Iraqi elections, which had supported the market recently, are all out of the way.
It's difficult to place a buy order now," said Tetsu Emori, chief strategist at Mitsui Bussan Futures. "If crude inventories rise significantly, the market could collapse," he added.
According to a Reuters survey of analysts, US crude inventories rose 1.5 million barrels in the week to January 28 as imports flooded in and refiners slowed rates for maintenance work.
The US Department of Energy releases its data.
Analysts also forecast US distillate stocks, which include heating oil and diesel, to fall by 2.4 million barrels after a cold snap hit the Northeast region, the world's largest consumer of winter heating fuels.
Temperatures in the region have returned to seasonal norms this week and are forecast to remain warmer than usual for the rest of winter, easing pressure on low fuel inventories.
Gasoline supplies were seen easing 300,000 barrels.
An unexpectedly big draw on supplies last week followed by fires at the gasoline units of two US refiners has spurred concerns over summer motor fuel supplies, nearly four months before the start of the peak demand holiday season.
Rising stocks will throw the spotlight back on the Organisation of the Petroleum Exporting Countries as officials have warned that a rapid build in inventories or sharp price decline could prompt action before its next meeting on March 16.
Having finally abandoned its $22-$28 price target, Opec appears set to defend $40 US oil by leaving the door open to deepening supply curbs to contain a springtime stockbuild.
It cut its production ceiling by 1 million bpd from January 1 after prices dipped as low as $40.25 a barrel in December.