SINGAPORE - Oil prices were stagnant on Wednesday, taking stock as U.S. fuel supply data painted a gloomy picture for demand, while hopes remained that Russia would join other major producers to slice output to lift prices.
One uncertainty was largely removed from the market when the United States and Russia came to a compromise over sanctions on Iraq, paving the way for the renewal of the U.N. oil-for-food deal by the Friday deadline and for Baghdad's oil sales to continue uninterrupted.
U.S. light crude edged down eight cents to $19.40 a barrel after jumping 79 cents in New York on Tuesday.
Brokers said industry statistics indicating poor petroleum demand in the United States, the world's biggest consumer, would dampen sentiment, but overall attention was focused on Russia.
Oil prices jumped 60 to 80 cents on Tuesday when Moscow said it would consider in December bigger oil export cuts as demanded by the OPEC producers' cartel.
The world's second biggest producer after Saudi Arabia, had offered a limp 50,000 bpd of its seven million barrels of daily output, a level OPEC said was not enough.
The Organization of the Petroleum Exporting Countries wants to slash world supplies by 1.5 million barrels per day from January to lift prices from near two-year lows. But the cut is contingent on non-OPEC exporters like Russia, Norway and Mexico reciprocating with curbs totaling 500,000 bpd.
Non-OPEC Mexico has agreed to 100,000 bpd, while Norway has offered up to 200,000 bpd and OPEC wants Russia to make cuts of a similar magnitude.
OIL-FOR-FOOD LOOKS SAFE
Russia also was pivotal this week in negotiations at the United Nations in New York where diplomats were rushing to agree to a new tranche of the oil-for-food program allowing Iraq to sell crude to buy humanitarian goods.
With the Friday deadline looming, the United States obtained Moscow's commitment on Tuesday to revise U.N. sanctions on Iraq in six months.
The deal means that the current 10th tranche of the oil-for-food program will likely be renewed on the same terms but include language on future action by the 15-member United Nations Security Council.
There were fears that U.S.-British efforts to revamp the decade-old sanctions on Baghdad might lead to Iraq stopping its crude exports of some two million bpd.
Russia, an ally of Iraq and which holds a veto on the U.S. Security Council, opposed the Anglo-American proposals, which aim to streamline the passage of civilian goods to Iraq but tighten up controls on items that could be used for military purposes.
A draft resolution of the agreement, obtained by Reuters, allowed Russia to water down a list of "dual use" goods agreed by the United States, France, Britain and China. The 15-membered Council will vote on the resolution by the end of the week.
MILD WINTER, RISING STOCKS
The continued flow of Iraq crude, however, may weigh on oil prices following the release of the American Petroleum Institute (API) data showing a sharp jump in U.S. refined product stocks.
Temperatures heading into winter have been milder than normal, curbing demand for heating oil, while gasoline use during the Thanksgiving holiday fell below expectations, analysts said.
Poor consumption was reflected in swelling stocks. The API said distillate inventories, including diesel and heating oil, jumped by five million barrels to 134 million, about 15 percent above year-ago levels.
Gasoline stocks rose two million barrels to 208 million, and are now more than seven percent above levels last year.
Crude oil inventories fell by 800,000 barrels to just over 308 million last week, although the market expected a one million barrel rise. However, supplies remain almost 17 million barrels above this time one year ago.