Oil firms over $61 on US stock drop, ahead of OPEC

By Staff
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SINGAPORE, Dec 14 (Reuters) Oil prices edged up on Thursday after a larger than expected drop in US crude stocks and as traders waited to see if OPEC ministers meeting in Nigeria would hold off from making further cuts to output.

U.S. light crude for January rose 19 cents to .56 a barrel, to add to 35-cent gains on Wednesday. London Brent crude for January had not traded by 0200 GMT, ahead of its expiry on Thursday, while February Brent gained 7 cents to .80.

OPEC meets on Thursday to set output policy. Ministers agree the market is oversupplied, but some say winter is the wrong time to cut, with U.S. government data on Wednesday showing crude stocks slid by 4.3 million barrels as imports declined.

''Last week's hefty draw on bloated U.S. crude oil stocks came too early to ascribe it to OPEC,'' said Jan Stuart at UBS. ''As OPEC cuts take hold and refiner crude oil demand rises, prompt surpluses should turn into prompt tightness as early as next quarter.'' Thursday's OPEC meeting will consider two recommendations from OPEC's advisory committee -- to ensure members adhere to a deal to cut output from November before meeting again in January, or to implement a modest 300,000 barrels per day cut from Jan. 1.

OPEC research director Hasan Qabazard said if members abide by the deal they struck in October, that should restore equilibrium.

OPEC has delivered almost two thirds of the 1.2 million bpd reduction so far, according to Reuters estimates.

OPEC delegates said Algeria, Iran, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates favoured stricter compliance and no change to OPEC's 26.3 million bpd production target.

''I don't think there will be any cut,'' the head of Libya's delegation, Shokri Ghanem, told Reuters in Abuja on Wednesday.

U.S. Energy Secretary Sam Bodman and International Energy Agency head Claude Mandil have called on OPEC to wait until next year before deciding on further supply reductions.

OPEC supply cuts already in place are tightening the world market and are ''cold comfort'' for a risk-prone global economy, the International Energy Agency said on Wednesday.

A lower estimate of supply from producers outside OPEC prompted the IEA to slightly increase an estimate of demand for the group's crude in 2007 to 28.4 million bpd.

''OPEC seems to be edging away from cutting oil production at today's meeting and delaying any decision until January,'' said Tobin Gorey of the Commonwealth Bank of Australia.

The IEA maintained previous forecasts calling for world oil demand to rise by 1.1 percent in 2006 and by 1.7 percent in 2007 to 85.9 million bpd. It said the 2007 forecast faces ''downside risks'' because of an uncertain U.S. economic outlook.

Warmer U.S. weather that has capped demand for heating fuels in the world's top energy consumer this month should continue through much of next week and possibly longer, forecasters said.

REUTERS PKS RS1210

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