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US oil futures inched lower early on Wednesday but remained near $ 63 a barrel after a flood of buying by funds had sent the price to a two-and-a-half-month high the previous day.

US oil futures inched lower early on Wednesday but remained near $ 63 a barrel after a flood of buying by funds had sent the price to a two-and-a-half-month high the previous day.

NYMEX crude for February delivery eased to $ 62.94 a barrel, down 20 cents from Tuesday, when prices hit a session peak of $ 63.80, the highest since mid-October. Prices have climbed almost $ 5 or 8.5 per cent over the past week.

Analysts said investors hoping to capitalise on another strong year for commodities were ploughing in fresh cash, particularly into oil, which has fallen from a record high of $ 70.85 a barrel at the end of August.

‘Oil didn’t perform very well towards the end of last year and the funds are looking to make up for that, and so we should see the market bid up in the near term,’ said commodities analyst Tobin Gorey of Commonwealth Bank of Australia in Sydney.

February heating oil held steady in early trade at $ 1.7925 a gallon after peaking in the previous session at $ 1.8550, a level not seen since December 15.

Heating oil rallied on both sides of the Atlantic after Russia briefly cut off some of its natural gas supplies to Europe in a pricing row with Ukraine, heightening concerns about energy supplies and sending consumers looking for other heating fuels as colder winter temperatures set in on the continent.

Russian state-controlled producer Gazprom cut natural gas supplies to Ukraine on January 1 after the former Soviet neighbour rejected demands for a fourfold price increase, but it restored the flows the next day after complaints from European countries that reported sharp falls in deliveries.

The underlying dispute remained unresolved, however, raising concern over Europe’s long-term dependence on Russian energy.

Despite the gas dispute in Europe, gas futures in the US fell 1.6 per cent to $ 10.44 per million British thermal units in electronic trading as forecasts of warmer weather across the United States looked set to limit demand.

Total US demand for heating fuels is expected to be about 25 per cent lower than normal this week, the government’s forecasting agency said on Tuesday.

Warmer-than-usual winter weather last week probably helped U.S. distillate inventories build by 900,000 barrels in the week to December 30, according to a poll of nine analysts.

Crude stocks were seen falling by 1.5 million barrels, however, due to lower imports and year-end tax liquidation.

The US government data will be out on Thursday, a day later than usual due to the New Year holiday on Monday.

Source : economictimes.indiatimes.com

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