Oil steadies at $62 after fall on mild US weather

SEOUL, Dec 19 (Reuters) Oil steadied at $62 a barrel on Tuesday as continued weather delays to U.S. crude shipments could hit inventory levels, balancing mild temperatures in the world's top consumer that are cutting into heating fuel demand.

U.S. light January crude was 4 cents higher at $62.25 a barrel by 0312 GMT ahead of the contract's expiry on Tuesday, after falling $1.22 on Monday, the first drop in four sessions.

London Brent for February gained 13 cents to $62.26.

Prices were pressured after the U.S. National Weather Service said heating demand in the United States is expected to be around 25 percent lower than normal this week as mild weather persists in the key Northeast and Midwest heating oil consumer regions.

''Warmer weather makes it difficult for traders to buy, but the holiday season is keeping the market quiet,'' said Ryuishi Sato at Mizuho Corporate Bank.

Support came from shipping problems on the Houston Ship Channel, which remained paralysed by thick sea fog on Monday, delaying shipments to the nation's busiest petrochemicals port and leading some refiners to warn of slower fuel production.

U.S. crude supplies were expected to have fallen 2.0 million barrels last week because of the delays, said analysts in a Reuters poll Distillate fuel stocks were also seen falling in Wednesday's government data, despite the mild weather.

The market has also been bolstered by OPEC's decision last week to make a second output cut of 500,000 barrels per day (bpd) to start from February, on top of a 1.2 million bpd cut agreed from November.

A Reuters survey shows OPEC only met about two-thirds of its initial cutbacks, so some analysts question whether fresh limits will be effective in supporting prices that have slid about 20 percent from a record over $78 in July.

OPEC said on Monday the fundamentals of the world oil market are likely to show signs of weakening in 2007 as economic growth slows and supply from non-OPEC countries rises faster than demand.

''2006 may mark the shift from demand-driven markets to supply-driven markets,'' said SG Commodities in a report. ''Some investors -- mainly the hedge funds -- have already revised downward their expectations of demand. This probably explains the price drops experienced by energy.'' REUTERS CS DS1216