Oil Boom Profits

Working gas in storage was 3,121 Bcf as of Friday, December 22, 2006, according to EIA estimates. This represents a net decline of 46 Bcf from the previous week. Stocks were 458 Bcf higher than last year at this time and 355 Bcf above the 5-year average of 2,766 Bcf. In the East Region, stocks were 165 Bcf above the 5-year average following net withdrawals of 28 Bcf. Stocks in the Producing Region were 154 Bcf above the 5-year average of 793 Bcf after a net injection of 6 Bcf. Stocks in the West Region were 36 Bcf above the 5-year average after a net drawdown of 24 Bcf. At 3,121 Bcf, total working gas is above the 5-year historical range.

Oil fell Tuesday as warm weather continued to blanket the northeast U.S., but prices remained supported by worries Iran might disrupt oil flows in response to the U.N. Security Council's decision to impose sanctions on it.

U.S. crude for February delivery lost 81 cents to $61.60 a barrel on the New York Mercantile Exchange.

Public holidays across Europe meant trading volumes were very thin.

After months of deadlock, the Security Council agreed Saturday to impose sanctions on Iran's trade in nuclear materials and technology, drawing a warning from Tehran.

"If necessary, Iran will use any weapon to defend itself," Oil Minister Kazem Vaziri-Hamaneh was quoted as saying by the semi-official Fars news agency on Tuesday. In the past he has said Iran would rather not play the oil card.

Iran, the world's fourth-largest crude producer, has condemned the U.N. resolution as illegal and on Sunday vowed to speed up enrichment work, which could heighten tensions.

Oil prices rose earlier in the year because of fears Iran might cut its oil exports or disrupt Gulf shipping as its row with the West over its nuclear program escalated. The issue had faded since summer as the U.N. appeared unable to agree on how to deal with Tehran.

But analysts said traders might disregard the latest developments unless they saw evidence of supply disruption.

"It is certainly a bullish factor, but I think geopolitical matters will be ignored unless clearer risks materialize," said Makoto Takeda, energy analyst at Bansei Securities Co.

Oil prices hovered below $63 a barrel on Friday after falling from a three-month high in the previous session on unusually warm weather in the United States Northeast.

U.S. crude was up 27 cents at $62.93 a barrel by 1230 GMT, pausing after a more than $1 tumble from Wednesday's highest close for three months.

London Brent crude rose 39 cents to $62.85 a barrel.

The U.S. National Weather Service on Thursday joined a chorus of private forecasters predicting that mild weather would persist into January, extending a period of above average temperatures that has lowered demand for heating fuels.

Temperatures in the U.S. Northeast, the biggest heating oil consuming region in the world, are expected to average as much as 14 degrees Fahrenheit above normal into early next week, according to forecasters DTN Meteorlogix.

U.S. crude inventories were expected to rebound next week as Gulf Coast shipping delays eased following a week of intermittent disruptions due to fog.

But commercial crude and refined product stocks combined were 400,000 barrels lower than the same time a year ago, a sharp fall from a 76 million barrels year-on-year surplus three months ago.

“(A) rebound in demand growth against limited supply growth created the largest October/November U.S. inventory draw on record,” said Goldman Sachs in a report.

The investment bank reaffirmed its positive view on next year but cut its average price forecast by $3 to $72.50 a barrel, still among the industry's highest targets.

A downward revision in U.S. third-quarter economic growth to 2 percent – from a previously reported 2.2 percent annualised rate – sent a bearish signal for fuel demand growth from the world's top consumer.

Working gas in storage was 3,167 Bcf as of Friday, December 15, 2006, according to EIA estimates. This represents a net decline of 71 Bcf from the previous week. Stocks were 342 Bcf higher than last year at this time and 274 Bcf above the 5-year average of 2,893 Bcf. In the East Region, stocks were 110 Bcf above the 5-year average following net withdrawals of 52 Bcf. Stocks in the Producing Region were 117 Bcf above the 5-year average of 824 Bcf after a net withdrawal of 14 Bcf. Stocks in the West Region were 47 Bcf above the 5-year average after a net drawdown of 5 Bcf. At 3,167 Bcf, total working gas is within the 5-year historical range.

Summary of Weekly Petroleum Data for the Week Ending December 15, 2006

U.S. crude oil refinery inputs averaged over 15.5 million barrels per day during
the week ending December 15, up 232,000 barrels per day from the previous week's
average. Refineries operated at 90.7 percent of their operable capacity last
week. Gasoline production increased last week compared to the previous week,
averaging over 9.3 million barrels per day, while distillate fuel production
also increased, averaging over 4.2 million barrels per day.

U.S. crude oil imports averaged 8.9 million barrels per day last week, down
696,000 barrels per day from the previous week. Over the last four weeks, crude
oil imports have averaged over 9.6 million barrels per day, 470,000 barrels less
than averaged over the same four-week period last year. Total motor gasoline
imports (including both finished gasoline and gasoline blending components) last
week averaged 843,000 barrels per day. Distillate fuel imports averaged 541,000
barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic
Petroleum Reserve) dropped by 6.3 million barrels compared to the previous week.
However, at 329.1 million barrels, U.S. crude oil inventories remain well above
the upper end of the average range for this time of year. Total motor gasoline
inventories increased by 1.0 million barrels last week, but remain below the
lower end of the average range. Distillate fuel inventories rose by 1.2 million
barrels, and are in the middle of the average range for this time of year.
Increases were seen in both high-sulfur distillate fuel (heating oil)
inventories and diesel fuel inventories (a combination of ultra-low-sulfur and
low-sulfur). Total commercial petroleum inventories fell by 7.9 million barrels
last week, and are just above the upper end of the average range for this time
of year.

Total products supplied over the last four-week period has averaged over 21.1
million barrels per day, or 0.4 percent more than averaged over the same period
last year. Over the last four weeks, motor gasoline demand has averaged over
9.4 million barrels per day, or 2.3 percent above the same period last year.
Distillate fuel demand has averaged nearly 4.3 million barrels per day over the
last four weeks, or 2.0 percent above the same period last year. Jet fuel demand
is down 7.2 percent over the last four weeks compared to the same four-week
period last year.

The Paris prosecutor's office has launched a probe of suspected payments by oil giant Total SA in Iran, judicial officials said Tuesday.

The inquiry was opened Monday and will be led by two investigating magistrates, said the two officials who spoke on condition of anonymity because of laws requiring that details of judicial investigations be kept secret.

They said the judges will aim to determine whether Total made illicit payments relating to a gas contract in Iran, and whether there is sufficient evidence for charges of embezzlement and corrupting foreign officials.

The probe follows a tip-off from authorities in Switzerland, the officials said. They said Swiss judicial authorities have frozen bank accounts belonging to an Iranian-born Swiss national as part of an investigation of suspected money laundering.

Total shares fell 0.9 percent to euro54.50 (US$71.34) in Paris trading.

il held steady above $63 on Monday, as a dense fog delayed U.S. crude shipments and traders factored in OPEC's plan to further cut output.

U.S. crude traded one cent up at $63.44 a barrel by 0825 GMT, after rising 92 cents on Friday to the highest settlement in two weeks. London Brent slipped 3 cents to $63.46 a barrel.

Forecasts showed a fog delaying tankers carrying crude to refineries along the U.S. Gulf Coast could lift early this week, though vessel traffic on the Houston Ship Channel was halted again on Sunday night due to the fog.

Four days of intermittent delays on the waterway, which feeds the nation's busiest petrochemicals port, has led some refiners in the area to warn they may need to slow fuel production, but so far no Gulf Coast refinery has announced production cuts.

The shipping disruptions follow OPEC's decision on Thursday for a second output cut of 500,000 barrels per day (bpd) to start from February, coming on top of a 1.2 million bpd reduction agreed from November.

Five oil and gas companies, including Shell, ConocoPhillips and BP, have agreed to pay royalties on future production under flawed drilling leases in the Gulf of Mexico, the government said Thursday.

The companies are among 59 energy producers that hold the leases at issue from 1998 and 1999. Because of a government mistake, the leaseholders have avoided royalty payments on oil and gas taken from federal waters. The leases omitted language requiring royalties when prices reached a certain level.

The agreements with the five companies are "a step in the right direction" and may lead others to find a way to rework the flawed leases, said the Interior Department's assistant secretary, Stephen Allred.

Some members of Congress have estimated that the royalty exemptions have cost the government $2 billion. Allred put the amount at "somewhat less than $900 million."

Congressional auditors have put the total government loss for past and potential future production under the leases as high as $10 billion.

The companies that reached agreement to begin paying royalties as of this past Oct. 1 are Shell Oil Co., BP PLC, ConocoPhillips Co., Marathon Oil Co. and Walter Oil & Gas Corp.

More than 1,040 of the leases were issued and about 570 are actively held by 59 companies, according to the Minerals Management Service, the agency that manages the leasing program. The companies that settled hold all or parts of 131 of the flawed leases.

"They're significant players," Allred told reporters.

He said other major leaseholders have refused to rework the deals and that some have refused even to discuss them.

Allred also acknowledged that the agreements Thursday deal only with royalties from future production and not oil and gas already taken.

"We do not believe that we have any ability to unilaterally change a contract," he said, explaining why the department is not seeking to recover royalties already lost from production.

The refusal of most of the companies to even discuss ways to correct the error in the 1998-99 leases has produced a political firestorm in Congress.

Both Democrats and Republicans have threatened to bar companies from future Gulf of Mexico drilling leases unless they agree to renegotiate the flawed leases.

Speaker-to-be Nancy Pelosi, D-Calif., said on Thursday that resolving the matter will be a priority in the House's first 100 legislative hours after Democrats take control in January.

Allred, however, said banning companies from future leases if they do not rework the flawed ones would lead to legal fights and significantly could reduce domestic oil and gas production.

"Our fear is that our program would shut down" if companies were banned from future lease sales, Allred said.

Reps. Henry Waxman, D-Calif., incoming chairman of the House Government Reform Committee, and GOP Rep. Tom Davis of Virginia, the current chairman, asked Attorney General Alberto Gonzales on Thursday to review the Interior Department's claim it cannot legally recover past royalty losses.

They cited a private law firm's analysis that argued the government has "legal recourse to immediately seek recovery of lost taxpayer revenue" from past production under the defective leases.

"It appears that the assertions by MMS that there are no available remedies may be incorrect," Waxman and Davis said.

Oil prices rose above $62 a barrel Thursday as OPEC ministers agreed to hold production unchanged for now but set the stage for a cutback of half a million barrels a day in February.

Light, sweet crude for January delivery rose 80 cents to $62.17 a barrel on the New York Mercantile Exchange by afternoon in Europe. Brent crude for January, which expires at the close of trading Thursday, was up 90 cents at $62.23 a barrel.

The decision by the Organization of Petroleum Exporting Countries _ was confirmed by President Edmund Daukoru, who is also oil minister of Nigeria, along with ministers from other member nations.

With world inventories high but moving downward and the coldest days of the Northern Hemisphere winter still ahead, the move was a compromise _ meant to keep markets and consumers calm at least in the short term. It also left a possible window for the organization to decide against a cut in February should demand spike, moving prices move sharply upward.

The disagreement within OPEC over whether further reductions in output were needed reflected uncertainty over demand over the next four months, worries that inventories are too high and chafing over the shrinking U.S. dollar that makes each barrel of crude worth less than it was a year ago.

The U.S. Energy Department released data showing a 4.3 million barrel drop in U.S. crude oil inventories last week, while the International Energy Agency said in its monthly report that stockpiles of crude in industrialized nations fell by 40 million barrels in October.

In its latest supply report, the Energy Department said domestic crude oil inventories fell last week to 335.4 million barrels, but that was still 4 percent more than last year.

Gasoline stocks fell 100,000 barrels to 199.9 million barrels, their lowest level in more than a year and the lowest level for the week since 2000, the department's statistical arm said. Distillate stocks, which include heating oil and diesel fuel, also declined, dropping by 500,000 barrels to 131.9 million barrels.

Heating oil futures rose nearly 3 cents to $1.7600 a gallon, and gasoline futures were up more than 2 cents to $1.6400 a gallon. Natural gas rose 6.4 cents to $7.737 per 1,000 cubic feet.

Summary of Weekly Petroleum Data for the Week Ending December 8, 2006

U.S. crude oil refinery inputs averaged 15.3 million barrels per day during the
week ending December 8, down 169,000 barrels per day from the previous week's
average. Refineries operated at 89.1 percent of their operable capacity last
week. However, gasoline production increased last week compared to the previous
week, averaging nearly 9.3 million barrels per day, while distillate fuel
production declined, averaging over 4.0 million barrels per day.

U.S. crude oil imports averaged 9.6 million barrels per day last week, down
701,000 barrels per day from the previous week. Over the last four weeks, crude
oil imports have averaged over 10.0 million barrels per day, 132,000 barrels
less than averaged over the same four-week period last year. Total motor
gasoline imports (including both finished gasoline and gasoline blending
components) last week averaged 967,000 barrels per day. Distillate fuel imports
averaged 465,000 barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic
Petroleum Reserve) dropped by 4.3 million barrels compared to the previous week.
However, at 335.4 million barrels, U.S. crude oil inventories remain well above
the upper end of the average range for this time of year. Total motor gasoline
inventories inched lower by 0.1 million barrels last week, and are below the
lower end of the average range. Distillate fuel inventories declined by 0.5
million barrels, and are in the lower half of the average range for this time of
year. A decline in high-sulfur distillate fuel (heating oil) inventories more
than compensated for a slight rise in diesel fuel inventories (a combination of
ultra-low-sulfur and low-sulfur). Total commercial petroleum inventories fell
by 7.5 million barrels last week, and are just above the upper end of the
average range for this time of year.

Total products supplied over the last four-week period has averaged 21.0 million
barrels per day, or 0.7 percent more than averaged over the same period last
year. Over the last four weeks, motor gasoline demand has averaged over 9.3
million barrels per day, or 1.9 percent above the same period last year.
Distillate fuel demand has averaged nearly 4.3 million barrels per day over the
last four weeks, or 3.0 percent above the same period last year. Jet fuel demand
is down 6.5 percent over the last four weeks compared to the same four-week
period last year.

Crude oil rose on speculation that the Organization of Petroleum Exporting Countries, producer of 40 percent of the world's oil, may agree this week to cut output to prop up prices.

There is ``general support'' among OPEC members to reduce supply, OPEC President Edmund Daukoru said today in an interview in Abuja, Nigeria, where the group will meet Dec. 14. A price of $60 a barrel for U.S. benchmark crude, called West Texas Intermediate, is ``low,'' he said.

``Prices could sell off sharply after the meeting'' if the group fails to agree on an additional supply cut, Edward Meir, an analyst at Man Financial Inc. in Stamford, Connecticut, wrote in a report. ``The cartel has not only come up short in November, but its failure to trim again will not sit well with the markets.''

Crude oil for January delivery rose as much as 41 cents, or 0.7 percent, to $61.63 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The contact traded at $61.50 at 2:47 p.m. in London. Brent crude oil advanced 22 cents to $62.06 a barrel on the ICE Futures exchange in London. Brent has declined every day since Dec. 1.

OPEC should cut production again because of an oversupply of crude, Iranian Oil Minister Kazem Vaziri-Hamaneh said on Shana, the oil ministry's news agency. Iran is the 11-member group's second-largest producer.

Oil analysts and traders have been questioning OPEC's compliance with a previous cut. The group agreed to reduce daily production by 1.2 million barrels starting Nov. 1, citing rising stockpiles and slower than forecast demand growth. OPEC managed to reduce output by 550,000 barrels in November, according to a Bloomberg News survey.

Kuwait Satisfied

Most OPEC nations are satisfied with a price of about $60 a barrel, Kuwaiti Oil Minister Ali Jarrah al-Sabah said today, according to state-run Kuwait News Agency.

The group may see less need to cut output with prices above $60 a barrel, Maizar Rahman, the OPEC governor of Indonesia, said in Abuja. ``There are surplus amounts'' of crude oil stockpiles, he said.

OPEC's basket price, a weighted average of 11 blends produced by OPEC nations, fell 89 cents to $57.74 a barrel yesterday.

Crude oil has fallen about 2.5 percent this month as analysts and traders said they expect U.S. fuel inventories to meet demand for heating amid signs of mild weather.

Temperatures in the U.S. northeast, where 80 percent of U.S. heating oil is burned, will be above average from Dec. 17 through Dec. 25, the National Weather Service said yesterday.

U.S. distillate supplies probably gained 650,000 barrels last week, based on the median estimate from the Bloomberg News survey of six analysts. Stockpiles held 132.4 million barrels on Dec. 1, 0.9 percent more than the five-year average for the period.

Heating demand in the U.S. northeast will be 37 percent below normal through Dec. 18, Belton, Missouri-based forecaster Weather Derivatives said yesterday.

Crude oil inventories, already 14 percent above the five-year average, probably declined by 1.4 million barrels, based on the survey. Stockpiles held 339.7 million barrels on Dec. 1.

Oil prices fell in trading Monday amid mixed signals from OPEC officials about the possibility of production cuts when the organization meets later this week.

Forecasts of warmer U.S. weather also depressed prices.

Light, sweet crude for January delivery on the New York Mercantile Exchange dropped 33 cents to $61.70 a barrel in electronic trading by afternoon in Europe.

Brent fell 23 cents to $61.97 a barrel on the ICE Futures exchange.

Heating oil was down by more than a penny at $1.7459 a gallon while unleaded gasoline futures lost nearly a cent to $1.6140 a gallon. Natural gas prices dropped more than 25 cents to $7.308 per 1,000 cubic feet.

The market is somewhat uncertain what to expect from Thursday's meeting of the 11-member Organization of Petroleum Exporting Countries.

Some OPEC officials have been pressing in recent days for a cut in output on top of the production cut of 1.2 million barrels a day approved in October, while others have indicated that with prices above US$60 a barrel, the cartel was likely to refrain from cutting output at the meeting.

Some Saudi officials have expressed satisfaction with current price levels, but Saudi Oil Minister Ali Naimi said recently that he was concerned about excessively high oil inventories in major consuming nations.

Vienna's PVM Oil Associates also suggested that a weaker dollar could add to sentiment for production increases because crude is sold in dollars but much of the consumer goods purchased by OPEC nations is denominated in euros.

"A weaker U.S. currency does have an effect on oil producers' earnings," it said.

Recent data from the International Energy Agency showed stocks held among the 30 members of the Organization for Economic Cooperation and Development at the end of September at 2.76 billion barrels, the highest level in almost eight years and 4.5 percent higher than a year ago.

Expectations of milder temperatures in the United States also weighed on prices. Temperatures in the Northeast, the nation's largest heating oil market, were expected to moderate this week, with above-normal temperatures through most of the nation, according to the National Weather Service.

Oil prices should climb back above US$70 a barrel as a result of winter weather in the northern hemisphere and OPEC output decisions, a senior Iranian oil official said Sunday.

"The oil price in the world market has been more than [US]$70 per barrel in the past, but considering the fact that we are approaching winter and demand is increasing, this price could be higher," said Gholamhossein Nozari, managing director of state oil company NIOC.

"We are trying to increase the current oil price through controlling the market," the official IRNA news agency said.

Oil prices in New York and London closed just above US$62 per barrel Friday.

The Organization of Petroleum Exporting Countries meets Thursday to decide on output policy.

OPEC president Edmund Daukoru has said he favors a cut in production, deepening a cut of 1.2 million barrels per day agreed in October.

Iran's OPEC governor, Hossein Kazempour Ardebili, said OPEC ministers need to take into account ample US oil stockpiles, the weakening dollar, slower-than- expected world economic growth and forecasts of strong non-OPEC oil production growth.

"OPEC will make appropriate decisions by having these realities in mind," he said on the fringe of an energy conference in Teheran Sunday.

Saudi Electricity said it has awarded US firm General Electric contracts worth 3.65 billion riyals (HK$7.56 billion) to help expand three power plants in key regions of the country. The project would increase the capacity of the three plants in the Eastern and Central provinces by 2,860 megawatts, Saudi Electricity, the kingdom's biggest utility by market value, said.

Completion is expected within 20 months, it added without giving further details. The firm was forced to ration power for two weeks in August in the two provinces - the kingdom's main industrial hubs - due to technical failures.

Oil prices rose Friday, supported by a possible production cut by OPEC countries and amid violence in Nigeria, Africa's largest oil producer.

Light, sweet crude for January delivery gained 64 cents (U.S.) to $63.13 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe.

January Brent crude at London's ICE Futures exchange rose 93 cents to $63.50 a barrel.

Prices were also supported by uncertainty ahead of a meeting next week of oil ministers from the Organization of Petroleum Exporting Countries. Some officials have been pressing in recent days for a cut in output on top of a production cut of 1.2 million barrels a day, approved in October.

On Thursday, Saudi Arabia's ambassador to the U.S., Prince Turki al-Faisal, said current crude oil prices were “acceptable and imminently fair.”

In Nigeria, a militant group attacked a southern oil export terminal belonging to a subsidiary of Italy's Eni SpA early Thursday, taking three Italians and a Lebanese hostage and killing another person, officials said.

Agip officials said oil exports at the 200,000 barrels a day terminal were not affected. The group vowed more attacks will follow if their long-standing demands, which include compensation from Royal Dutch Shell PLC for alleged environmental pollution, are not met.

Since the beginning of 2006, militant groups in Nigeria have attacked pipelines and taken workers hostage in violence that has kept about 500,000 barrels a day of Niger Delta crude off the market, although output has grown offshore Nigeria.

Buying of oil futures was kept in check by forecasts of warmer weather in the United States next week.

Temperatures in the U.S. Northeast, the nation's largest heating oil market, were expected to moderate later in the week, with the National Weather Service forecasting above-normal temperatures through most of the nation next week.

The U.S. National Oceanic and Atmospheric Administration said last month that the unusual warming of water in the Pacific Ocean known as El Nino was expected to continue into winter. The federal Climate Prediction Center said the result could be warmer than normal temperatures over the western and northern United States and western and central Canada.

Natural gas futures fell fractionally to $7.668 per 1,000 cubic feet on the Nymex, unleaded gasoline rose 1.1 cent to $1.6385 and heating oil prices were up 1.82 cents to $1.7970 a gallon.

Working gas in storage was 3,406 Bcf as of Friday, December 1, 2006, according to EIA estimates. This represents a net decline of 11 Bcf from the previous week. Stocks were 232 Bcf higher than last year at this time and 282 Bcf above the 5-year average of 3,124 Bcf. In the East Region, stocks were 109 Bcf above the 5-year average following net injections of 10 Bcf. Stocks in the Producing Region were 129 Bcf above the 5-year average of 881 Bcf after no net change in stock levels. Stocks in the West Region were 45 Bcf above the 5-year average after a net drawdown of 21 Bcf. At 3,406 Bcf, total working gas is above the 5-year historical range.

Oil prices gained slightly in Asian trading Thursday after U.S. government data showed that domestic inventories of crude oil, gasoline and heating oil fell last week.

Light, sweet crude for January delivery rose 23 cents (U.S.) to $62.42 a barrel in Asian electronic trading on the New York Mercantile Exchange. The contract on Wednesday fell 24 cents to settle at $62.19 a barrel.

January Brent crude at London's ICE Futures exchange rose 32 cents to $63.39 a barrel.

In its latest petroleum supply report released Wednesday, the Energy Information Administration, the U.S. Department of Energy's statistical arm, said domestic inventories of crude oil fell by 1.1 million barrels last week to 339.7 million barrels, or 5.4 per cent above year-ago levels.

Gasoline stocks declined by 1.1 million barrels to 200 million barrels, or 2.6 per cent less than a year ago.

Inventories of distillate fuel, which include heating oil and diesel, shrank by 400,000 barrels to 132.4 million barrels, or 1 per cent below year-ago levels.

The decline in inventories came as refinery utilization rose 2.4 percentage points to 90.5 per cent of operating capacity.

Analysts surveyed by Dow Jones Newswires had predicted a build of less than 1 million barrels in both gasoline and crude stocks, and a modest drawdown in distillate stocks.

Also supporting prices was uncertainty ahead of a meeting next week of oil ministers from the Organization of Petroleum Exporting Countries. OPEC officials have been pressing in recent days for a cut in output on top of a production cut of 1.2 million barrels a day, approved in October.

Weighing on energy prices were expectations of milder temperatures in the United States. Temperatures in the Northeast, the nation's largest heating oil market, were expected to moderate later in the week, with the National Weather Service forecasting above-normal temperatures through most of the nation next week.

Heating oil futures rose half a cent to $1.7990 a gallon while natural gas prices added 3.8 cents to $7.765 per 1,000 cubic feet.

Oil prices were steady Wednesday after U.S. government data showed domestic inventories of crude oil, gasoline and heating oil fell last week.

The possibility of more production cuts by the Organization of Petroleum Exporting Countries has also kept a floor under prices. OPEC, which meets Dec. 14 in Nigeria, says it is concerned about ballooning worldwide crude oil inventories.

Light, sweet crude for January delivery rose 2 cents to $62.45 a barrel on the New York Mercantile Exchange. The contract had fallen a penny Tuesday.

January Brent crude at London's ICE Futures exchange fell 19 cents to $63.13 a barrel.

In its latest petroleum supply report, the Department of Energy said domestic inventories of crude oil fell by 1.1 million barrels last week to 339.7 million barrels, or 5.4 percent above year ago levels.

Inventories of gasoline declined by 1.1 million barrels to 200 million barrels, or 2.6 percent less than a year ago. Inventories of distillate fuel, which include heating oil and diesel, shrank by 400,000 barrels to 132.4 million barrels, or 1 percent below year ago levels.

Heating oil fell half a cent to $1.7933 a gallon, unleaded gasoline futures fell 1.2 cent to $1.63 a gallon and natural gas futures fell 9.7 cents to $7.588 per 1,000 cubic feet.

The U.S. Energy Department said Tuesday in its annual long-term world energy forecast that the price of oil, when adjusted for inflation, would decline between 2007 and 2015 as investments made in recent years of historically high prices bring new supplies to the market.

Summary of Weekly Petroleum Data for the Week Ending December 1, 2006

U.S. crude oil refinery inputs averaged nearly 15.5 million barrels per day
during the week ending December 1, up 319,000 barrels per day from the previous
week's average. Refineries operated at 90.5 percent of their operable capacity
last week. Gasoline production increased last week compared to the previous
week, averaging nearly 9.2 million barrels per day, while distillate fuel
production also increased, averaging nearly 4.2 million barrels per day.

U.S. crude oil imports averaged 10.3 million barrels per day last week, up
541,000 barrels per day from the previous week. Over the last four weeks, crude
oil imports have averaged 10.0 million barrels per day, 229,000 less than
averaged over the same four-week period last year. Total motor gasoline imports
(including both finished gasoline and gasoline blending components) last week
averaged 877,000 barrels per day. Distillate fuel imports averaged 303,000
barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic
Petroleum Reserve) declined by 1.1 million barrels compared to the previous
week. At 339.7 million barrels, U.S. crude oil inventories remain well above
the upper end of the average range for this time of year. Total motor gasoline
inventories dropped by 1.1 million barrels last week, and are below the lower
end of the average range. Distillate fuel inventories inched lower by 0.4
million barrels, and are near the middle of the average range for this time of
year. A decline in high-sulfur distillate fuel (heating oil) inventories more
than compensated for a slight rise in diesel fuel inventories (a combination of
ultra-low-sulfur and low-sulfur). Total commercial petroleum inventories fell
by 4.2 million barrels last week, and are just above the upper end of the
average range for this time of year.

Total products supplied over the last four-week period has averaged nearly 21.0
million barrels per day, or 1.7 percent more than averaged over the same period
last year. Over the last four weeks, motor gasoline demand has averaged nearly
9.3 million barrels per day, or 1.6 percent above the same period last year.
Distillate fuel demand has averaged over 4.3 million barrels per day over the
last four weeks, or 6.6 percent above the same period last year. Jet fuel demand
is down 0.6 percent over the last four weeks compared to the same four-week
period last year.

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Oil prices held their ground above $62 on Wednesday as caution set in ahead of U.S. inventory data, which are expected to show a fall in heating fuel stocks.

U.S. crude was trading 16 cents higher at $62.59 at 0736 GMT. London's Brent crude rose 15 cents to $63.47.

Analysts polled by Reuters expect U.S. government data on Wednesday to show a 500,000-barrel decline in distillate stocks, which include heating fuel, following higher demand after a major snow storm hit the northeast U.S. over the weekend.

Crude inventories were expected to rise by a slim volume as imports rebounded, keeping them at or near their highest level for the time of year since 1991.

The data will be released at 1530 GMT.

"Inventories remain the key and from comfortable levels, there's not much indication of unusual demand," said Tobin Gorey, an analyst at Commonwealth Bank.

"The cold snap in the U.S. will come to an end over the weekend and then warmer than usual temperatures will prevail for a couple of weeks. Supply is less likely to get critically tight," Gorey said.

The U.S. National Weather Service forecast higher than usual temperatures by the weekend in the U.S. Northeast, the top heating oil market. The mild weather could last for two weeks.

For now, oil prices have yet to convincingly leave behind the trading rut of $58-$64 a barrel established since mid-September, despite signs that OPEC is inclined to cut output again.

Most OPEC ministers have said they still see the need for a further output cut when they meet in Abuja on December 14 and that, regardless of price, the market is oversupplied.

The group, which controls more than a third of world oil exports, already agreed at an emergency meeting in October to trim 1.2 million barrels per day of output from November 1 to stem oil's steep slide.

But energy watchdog the International Energy Agency (IEA) opposed the possible cut, stating that the cartel should wait until winter demand data becomes available at the end of January.

Oil prices edged higher Tuesday as traders weighed forecasts calling for mild U.S. weather next week against anticipated further production cuts by OPEC.

Light sweet crude for January delivery rose 21 cents to $62.65 a barrel on the New York Mercantile Exchange. January Brent crude at London's ICE Futures exchange was up 40 cents at $63.85 a barrel.

Also on Tuesday, the U.S. Energy Department released its annual long-term world energy forecast. The agency predicted that the price of oil, when adjusted for inflation, would decline between 2007 and 2015 as investments made in recent years of historically high prices bring new supplies to the market.

After that, the Energy Department said it expects prices to resume an upward trend, bringing average real prices (in 2005 dollars) by 2030 to more than $59 a barrel. In nominal terms, that would be equivalent to about $95 a barrel. The agency said it expects OPEC to adjust its output over the next 25 years to try to keep average prices between $50 and $60 _ a range it is already trying to achieve.

In the very short-term, energy analyst Victor Shum said he expects the oil market to strengthen further as demand increases during the Northern Hemisphere winter. He predicted that $60 a barrel was the new price floor.

"In the short-term future, what's still going to move the market is the weather," said Shum, of Purvin & Gertz in Singapore.

At the moment, however, the U.S. autumn has been marked by relatively mild weather. Nymex natural gas fugures fell 7 cents to $7.73 per 1,000 cubic feet, while heating oil futures were steady at $1.809 a gallon. Unleaded gasoline futures were flat at $1.6674 per gallon.

Recent comments from key members of the Organization of Petroleum Exporting Countries suggest the cartel will push for further cuts in output when it meets Dec. 14 in Nigeria.

Recent data from the International Energy Agency showed stocks held among the 30 members of the Organization of Economic Cooperation and Development at the end of September at 2.76 billion barrels, the highest level in almost eight years and 4.5 percent higher than a year ago.

This means OECD members have 55 days' worth of oil consumption in stock, a significant two days more than a year ago.

Saudi Arabian Oil Minister Ali Naimi has said OPEC needs to take 100 million barrels out of the market to balance it. Kuwait's Oil Minister Sheik Ali Al Jarrah Al Sabah, who was also at a meeting of Arab oil producers in Cairo, agreed.

The figure is close to what the IEA estimates is the stock build in the third quarter of this year _ the highest for the period in 14 years _ and it equates to more than 1 million barrels a day.

Oil prices fell on Monday, unwinding steep gains last week that were spurred by mounting expectations of a second OPEC supply cut and as colder weather began to eat into U.S. fuel stocks.

U.S. crude was trading 51 cents lower at $62.92 a barrel by 6:32 a.m. EST, while Brent crude traded down 60 cents at $64.02.

"The run up that we had was too much, too soon," said Olivier Jakob of Petromatrix.

U.S. crude hit a 17-month low of $54.86 on November 17, but has since recovered, climbing by around $4 last week and reaching a peak of $63.82 early on Monday, the highest since September 28.

Most OPEC ministers have said they still see the need for a further output cut when the producer group meets in Abuja next week and that, regardless of price, the market is oversupplied.

The group already agreed to reduce supplied by 1.2 million barrels per day from November 1.

"The price is firming somewhat, but against a weakening dollar, and there is still a lot of excess volume out there," OPEC President Edmund Daukoru said in Abu Dhabi on Monday.

The dollar's slide to a series of 20-month lows against the euro (EUR=) has triggered buying across the commodities complex as dollar-denominated assets are relatively cheap, but it has eroded revenues for oil producing countries.

Some analysts have said, however, OPEC could be more worried about the forecasts of economic weakness in the United States, the world's biggest oil consumer, that have contributed to the dollar's slide.

A weaker U.S. economy would impact oil demand and lower oil prices, although in the immediate term, tightening inventories could provide some support.

Angola, the largest sub-Saharan oil producer in Africa after Nigeria, said it will apply to join OPEC next month, while the oil cartel's secretary general said Sudan also was poised to join.

OPEC Secretary General Mohammed Barkindo, speaking to Dow Jones Newswires on Thursday on the sidelines of a producers' meeting in Egypt, gave no timetable for Angola or Sudan to join the group, which has not welcomed a new member since 1975.

Joining offers prestige, but would mean adhering to OPEC production quotas -- though members routinely violate the limitations. OPEC agreed in October to cut total production by 1.2 million barrels a day to about 26.3 millions barrels a day as of Nov. 1, and further cuts aimed at shoring up prices could be coming. OPEC controls about 40 percent of the world's daily oil consumption.

Oil prices are down about 20 percent since hitting a high above $78 a barrel in mid-July, though light sweet crude for January delivery rose 57 cents to $63.03 a barrel Thursday on the New York Mercantile Exchange.

David Fyfe, an International Energy Agency analyst, told Dow Jones Newswires that Angola and Sudan could significantly boost OPEC's influence over global oil markets because of the added volume. But Fyfe pointed out the cartel was having trouble getting existing members to adhere to quotas, speculating that adding members would only make that more difficult.

Angola's crude production, most of it from offshore rigs operated by foreign companies, has climbed to around 1.4 million barrels a day but is expected to reach 2 million barrels a day by April. Sudan produces about half a million barrels a day.

Angola's announcement that it planned to apply for OPEC membership appeared to have little effect on prices. Ehsan Ul-Haq, chief analyst at PVM, noted Angola would not be joining before March, and said "they don't produce enough to have an immediate impact."

A senior Angolan official told The Associated Press the formal membership request would be presented at OPEC's Dec. 14 meeting in Abuja, Nigeria. The official spoke on condition of anonymity because he was not authorized to discuss the issue publicly.

Angola said in a statement late Wednesday the application stemmed from its "growing role in the world oil sector."

The southwest African country is China's largest supplier of crude after overtaking Saudi Arabia this year.

Foreign oil companies operating in Angola include Chevron Corp., BP PLC, Exxon Mobil Corp., and Total SA. State oil company Sonangol oversees the sector and awards operating licenses.

In Vienna, OPEC spokesman Omar Farouk Ibrahim said he did not foresee any problems with Angola's application, noting it has been an observer for some time and has attended OPEC conferences with that status.

Three-quarters of the membership must approve an application, including all founding members -- Iran, Iraq, Saudi Arabia, Kuwait and Venezuela.

OPEC member Venezuela supports Angola's membership bid, that country's oil minister, Rafael Ramirez, told reporters in Venezuela Thursday.

OPEC currently has 11 members. Ibrahim said Gabon, in 1975, was the last country to join the organization, two years after Ecuador joined in 1973. However, both withdrew in the 1990s. Nigeria joined in 1971 and has remained a member.

Oil revenues provide around 80 percent of Angola's state income. The country, a former Portuguese colony, is now relatively stable politically after a ruinous two-decade civil war ended in 2002.

Human rights groups, however, have accused Angola's leaders of concealing the exact amount the country receives from crude sales and of stealing some of the money. Angolan officials have denied the charges.

The International Monetary Fund has also complained about a lack of openness in oil sector accounting in Angola

Angola steered closer to the United States in the early 1990s and has maintained close ties with France. However, since the civil war ended Angola has deepened cooperation with China and, more recently with Russia.

Last month Russia's OAO Lukoil and Sonangol signed a memorandum of understanding on joint exploration of Angola's offshore oil fields.