Oil stable after US stock draw ends falling streak

SINGAPORE, Nov 16 (Reuters) Oil held steady below a barrel on Thursday after a deeper-than-expected draw in fuel stocks in the United States triggered the first rise in four sessions.

U.S. light crude for December delivery was down 3 cents a barrel at .73 by 0615 GMT, having settled 48 cents higher on Wednesday after U.S. distillates and gasoline inventories fell sharply last week amid lower refinery output and strong demand.

London Brent crude for January was down 9 cents at .52.

''The strong demand in gasoline and distillates is very surprising,'' said Tetsu Emori, chief strategist at Mitsui Bussan Futures. Total U.S. oil demand is up 4.8 percent from a year ago, the data showed. Demand for distillates is up 9.5 percent.

''If the trend lasts a few weeks, prices may be taken higher. But crude oil inventories are still very high so the potential upside could be limited.'' Distillates stocks in the U.S. fell by 3.6 million barrels last week, nine times bigger than the expected draw, and gasoline stocks dropped by an unseasonally high 3.7 million barrels, the Energy Information Administration (EIA) said in its weekly report.

U.S. crude oil stocks rose 1.3 million barrels though, the third consecutive weekly rise, as refinery utilisation unexpectedly slipped by nearly one percentage point due to unplanned outages and some maintenance.

While stocks generally remain above historical norms, some analysts warned that their steep fall and strong demand growth may quickly shift market sentiment.

Barclays Capital said U.S. products inventories have recorded their fastest ever rate of descent over a five-week period relative to normal seasonal patterns.

''We believe that the market is ultimately going to face over-tightening, and the longer it takes before prices make a more significant move up, the more vicious it is likely to be the whiplash when they do start to move,'' the report said.

The fall in inventories could accelerate as the latest weather forecasts point toward slightly colder-than-normal conditions in the eastern United States this year, AccuWeather said in an updated outlook on Wednesday.

For now, oil prices remain stuck in the - trading rut that they have maintained since early October, prevented from deepening a retreat from mid-July's .40 peak by the threat of more OPEC cuts, but facing limited upside due to hefty stocks and warmer-than-usual weather in the U.S. Northeast.

OPEC has been preparing the ground for a further production cut when it meets in December, deepening the 1.2 million barrels per day (bpd) curbs it imposed from the start of this month.

Cartel President Edmund Daukoru told Reuters on Wednesday the general sentiment within the organisation was for another cut, while the group's monthly report also warned that prices may tumble after the northern hemisphere winter as OECD oil stocks reached their highest in eight years.

REUTERS CS SND1445