* Refinery rates down, product prices up
* Saudi Arabia to deepen output cuts in February
(Updates prices, changes timeline from previous LONDON)
By Edward McAllister
NEW YORK, Dec 31 (Reuters) - US crude oil prices jumped
above $40 a barrel in thin pre-holiday trade on Wednesday,
tracking a 4 percent jump in heating oil futures as a slowdown
in domestic refinery activity sparked fears of tightening fuel
supplies this winter.
U.S. crude oil futures for February <CLc1> rose $1.62 to
$40.65 per barrel by 12.44 p.m. EST (1744 GMT) -- still more
than 60 percent below last year's closing level of $95.98 but
up from this year's low of $32.40 hit on Dec. 19, but
London Brent <LCOc1> was up $1.69 at $41.84.
Weekly U.S. inventory data on Wednesday showed a decline in
refinery activity and a 500,000 barrel rise in crude stocks,
compared with forecasts for a 1.5 million barrel decrease.
"There's a sign that the industry might be cutting back on
production rates to try to boost margins. As heating oil and
gasoline prices are rallying, crude is tagging along," said
Gene McGillian, analyst at Tradition Energy Stamford,
Connecticut.
"The market is trading in pretty thin volume ahead of
tomorrow's hoilday and I think that's contributing to some of
the strength," he added.
Inventories of refined products also rose, though less than
analysts had expected. Gasoline stockpiles increased by 800,000
barrels, less than forecasts for a 1.5 million barrel build,
while distillates rose by 700,000 barrels, below expectations
for a 1.1 million barrel increase.
Demand for both gasoline and distillates, which include
heating oil, was lower than the same time a year ago, extending
the trend for reduced consumption. []
Markets also were watching a dispute over gas supplies
between Russia and Ukraine, which may have to buy distillates
from Europe if gas supplies from Russia are halted.
[]
Oil prices went on a wild ride in 2008, surging to a record
high above $147 in July and then plunging as the global
economic slowdown bit deep into energy demand. The latest U.S.
inventory data showed further rises in fuel stocks.
Analysts forecast an average of $49 a barrel for U.S. crude
in the first quarter, and an average of $58.48 for next year,
down $14 from their previous forecasts, the latest Reuters poll
showed. []
Faced with slumping demand and prices, the Organization of
the Petroleum Exporting Countries (OPEC) this month said it was
cutting output 2.2 million barrels per day (bpd), its deepest
reduction ever.
Evidence is mounting that OPEC is complying with its goal
to reduce production, led by top exporter Saudi Arabia.
Market sources said on Tuesday the kingdom's supplies to
long-term buyers in February could imply production of even
less than its new OPEC production target. []
(Additional reporting by Robert Gibbons in New York,
Christopher Johnson in London and Chua Baizhen in Singapore;
editing by Anthony Barker)
