Oil up near $90/bbl as crude, gasoline inventories drop

Wed Dec 22, 2010 2:50am GMT

* U.S. crude, gasoline inventories drop- API

* Cold weather continues to support

* Coming Up: EIA oil inventory data; 1530 GMT

By Rebekah Kebede

PERTH, Dec 22 (Reuters) - Oil prices rose on Wednesday to hover just below $90 a barrel, supported by data showing a drop in U.S. oil and gasoline inventories, a winter cold snap in the United States and Europe amid thin trading volumes.

U.S. crude for February CLc1 climbed 10 cents to $89.92 a barrel by 0248 GMT. ICE Brent crude LCOc1 rose 17 cents to $93.37.

American Petroleum Institute data released late on Tuesday in the U.S. showed a large 5.8 million barrel decline in weekly crude stocks, surpassing analyst expectations.

"Big drops in crude oil and gasoline inventories in the API data pushed the oil market to the up. But buying interest around this level, around $90 a barrel, is not so large, " said Ken Hasegawa, a commodity derivatives  manager at Japan's Newedge brokerage.

API data also showed an unexpected 2.9 million barrel fall in gasoline inventories.

The U.S. Energy Information Service will release its U.S. inventory data at 1530 GMT on Wednesday.

Oil prices were also supported by chilly weather in northern Europe and the United States, which has increased heating fuel demand. U.S. heating oil demand was expected to average 4.6 percent above normal this week. [ID:nSGE6BJ05E]

AccuWeather.com expects temperatures in the U.S. northeast to average mostly below normal for the next week, with slightly milder readings late this month.

Thin trading volumes lent further support to oil prices.

"Ahead of the long Christmas holiday, there are relatively fewer participants. Therefore, it is possible to extend gains through the night on thin volumes, but I don't think the market is that bullish," Hasegawa said.

The U.S. dollar fell slightly against a basket of currencies. A weaker greenback supports dollar-denominated commodities such as oil, making it cheaper for those holding other currencies. (Editing by Himani Sarkar)