* EIA outlook bullish; data due at 1530 GMT
* U.S. cold snap lends support
(Changes dateline to London, recasts)
By Emma Farge
LONDON, Dec 30 (Reuters) - Oil held near $79 on Wednesday as
cold weather in the United States and an expected fall in both
U.S. crude and distillate stocks including heating oil countered
a firmer dollar, shoring up prices after a five-day rally.
U.S. crude for February delivery <CLc1> rose 1 cent to
$78.88 a barrel by 1053 GMT in thin pre-holiday trade after
touching a five-week high the previous day.
London Brent crude for February <LCOc1> rose 29 cents to
$77.93 a barrel.
A cold snap that has hit the main U.S. heating hub on the
northeast coast has boosted demand for oil products and helped
drain swollen distillate stocks that this summer were at 26-year
highs. Temperatures will remain unseasonably cold for the next
48 hours, according to private forecaster Meteorlogix. []
"We are seeing the first signs of a concerted improvement in
U.S. demand and distillates are falling, (high stocks of) which
have been responsible for the bulk of the weakness so far," said
Barclays Capital oil analyst Amrita Sen.
U.S. crude stocks are expected to fall by 2 million barrels
in what would be the fourth straight week of draws, according to
a preliminary poll of Reuters analysts ahead of the weekly
government Energy Administration Information report at 1530 GMT.
Distillate stocks, which include heating oil, are set to
fall by 2.2 million barrels, the poll said. []
Data from U.S. industry group American Petroleum Institute
(API) released on Tuesday was mixed and showed a surprise 1.7
million barrel build in U.S. crude stocks and a 3.5 million
barrel drop in distillates. []
"API data is generally just a lead to the EIA. That's the
one that really causes the market to move," said Ben Westmore,
commodities economist at National Australia Bank.
The U.S. dollar rose to a two-month high against the yen on
Wednesday as more positive macroeconomic data has caused some to
review their expectations for U.S. rate rises in 2010. []
Weakness in the U.S. currency has been one of the factors
behind the oil price rally this year as currency investors have
fled the currency in search of commodity safe havens. A weak
dollar also makes commodities such as oil cheaper for investors
holding other currencies.
Oil prices are now trading at roughly double the levels seen
this time last year, when they dipped below $40 a barrel.
As well as the EIA stocks due later on Wednesday, traders
will be scouring U.S. macroeconomic data before making further
bets on oil price moves in 2010. Analysts said that further
confirmation that the economic recovery is underway could push
prices above the $80 a barrel level.
"Oil has the ability to be at $80 a barrel or slightly
higher but it is unlikely to go above it unless there are
further signs that the fundamentals are improving," said Sen.
The U.S. weekly mortgage market index will be published at
1200 GMT and the Kansas City manufacturing index for December at
1600 GMT.
U.S. consumer confidence improved more than expected in
December, according to a private report released on Tuesday.
[]
Concerns about a potential supply impact of political
developments in the OPEC member country Iran have also supported
prices this week.
A representative of Iran's Supreme Leader Ayatollah Ali
Khamenei said on Tuesday opposition leaders were "enemies of
God" who should be executed under the country's sharia law.
[]
(Additional reporting by Judy Hua in Singapore; editing by
Anthony Barker)
