World oil prices fell nearly $3 a barrel yesterday, shedding 6 percent, as a larger-than-expected build in US heating stocks soothed worries about a winter fuel deficit.
US crude was down $2.81 a barrel at $46.32 a barrel, off 5.7 per cent. London Brent crude, benchmark for European imports, fell $2.86 to $42.65 a barrel, off 6.3 per cent.
The U.S. Energy Information Administration (EIA) said distillate stocks, including heating oil and diesel, rose 2.3 million barrels in the week to November 26th to 117.9 million barrels.
"We were looking for a build in heating oil, but not so much in diesel and here we got both," said Mr Ed Silliere, analyst at Energy Merchant in New York.
"Mother Nature is going to be huge in the next several weeks," said Mr Kyle Cooper, analyst at Citigroup Global Markets.
"Long term I think we're headed to $30-$35 but I don't think we're doing that yet. We have a lot of winter left." The inventory build unwound some of the renewed gains in oil prices that saw US crude briefly top $50 a barrel on Monday after touching a two-month low at $45.25 in mid-November.
Crude set a record peak above $55 at the end of October.
Winter concerns are not over yet though. U.S. distillate stocks remain 13 per cent lower than a year ago, compared to a 14 percent year-on-year shortfall a week ago.
The EIA data showed heating oil stocks rose one million barrels to 49.9 million, closing the gap versus last year to 14 per cent from a 16 per cent deficit last week.
Mild weather in the U.S. Northeast, the biggest heating oil market worldwide, has helped soften distillate demand just as refineries lift output after seasonal maintenance.
U.S.-wide refinery operations rose 1.1 per cent to 94 per cent of capacity, the EIA report said.
Several forecasters expect temperatures to fall below normal in the Northeast in the new year.
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