SINGAPORE: Brent futures held above $107 a barrel on Friday, as a bitter cold in the United States boosted demand for heating oil and drew down the country's stockpile of crude and distillates. Distillate stocks plunged three-and-a-half times more than expected, driving US ultra low-sulfur diesel futures (ULSD), or heating oil, futures to their highest this year and helping the US crude benchmark towards its best week in seven.
Brent, poised for its biggest gain in five weeks, also climbed as European refiners shipped diesel to the world's biggest oil consumer. Brent crude rose 8 cents to $107.66 a barrel by 0509 GMT, ending 69 cents lower in the previous session following weak factory activity data from China, the world's second-largest oil consumer.
US oil increased 18 cents to $97.50, extending gains after settling 59 cents up.
"The US benchmark is drawing support from the fall in heating oil stocks as a result of the severe winter," said Tetsu Emori, a commodities fund manager at Astmax Investment.
"It may be helping Brent as European refiners export heating oil to the United States, to the East Coast." Refiners in Asia, Europe and Russia are shipping around half a million tonnes of heating oil and diesel to the United States this month, with at least a dozen tankers booked so far in January to ship gasoil and diesel to the US East Coast, according to traders and shipping data.
US distillate stocks fell 3.21 million barrels in the week ended Jan. 17, the Energy Information Administration (EIA) said, compared with analysts expectations of a 900,000 barrel draw.
Distillate demand over the past four weeks rose 5.2 percent from a year earlier to 3.46 million barrels, the EIA said. "Distillates stocks decreased by more than expected, with stocks remaining below the bottom of the five-year range," analysts at BNP Paribas said in a note.
These supporting factors may result in the US benchmark rising towards $98 a barrel and Brent inching higher to around $108.50, said Emori of Astmax Investment.
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