Crude futures recouped early losses on Tuesday on expectations that the weekly US inventory statistics, released on Wednesday, would show tighter fuel supplies.

A report from the International Energy Agency painted a gloomy picture of increasing demand and future threats to supply. But this had little immediate impact on the oil price, as funds and speculators were only interested in the here and now and considered that Monday’s run-up was the trigger for profit taking.

“There is little in the strong fundamental dynamics of the market that has changed substantially over the past few days,” said Kevin Norrish at Barclays Capital, adding that price movement - for the time being - looked “skewed to the upside”.

Pressures on the commodity eased on Tuesday morning after a dispute that threatened output from Norway, the world’s third-largest producer, was settled. The Norwegian government intervened to end a 16-week dispute over benefits between the OFS labour union and the Norwegian Shipowners Association. Ship and rig owners were threatening a workers lockout on November 8 which would have shut all Norway’s 3m barrels a day output.

A Statoil spokesman could not say how long it would take OFS members to resume work, but said it would then take around two days for production to resume. The shutdown threat pushed the Nymex WTI crude front month future price to yet another historic record of $55.67 a barrel in early trade on Monday.

Purnomo Yusgiantoro, Opec president, said on Tuesday that global crude output exceeded demand by as much as 2.5m barrels a day. And production at Opec, which accounts for about a third of world supply, could be much higher. PetroLogistics, a Geneva-based consultancy, said Opec production in October was 30.7m barrels a day - the highest in 25 years.

Inventories data released on Wednesday are expected to show further tightness in supply to the US. Heating oil inventories in the week to October 15 were 10-15 per cent lower than a week earlier, as 400,000 barrels of oil production remains down six weeks after Hurricane Ivan.

“With little relief likely to come from the supply side, any noticeable retrenchment in energy prices will most likely have to be demand-induced,” said Edward Meir at Man Financial.

But this remained unlikely as the threat of winter power shortages in China were reporting in a national newspaper in the world’s second-largest consumer.

“Shortages of electricity were a key factor boosting demand for oil earlier this year,” said Mr Norrish. “This looks like continuing to support Chinese demand for oil and refined products during the winter months.”

Nymex WTI added 20 cents to $54.75, by midday in New York while Brent gained 24 cents to $51.02.

Gold slipped as traders took advantage of a near 16-year peak and the dollar recovered from eight-month lows hit on Tuesday. On Monday, bullion hit $430.20, 30 cents off its January peak and within touching distance its August 1988 summit.

By midday in New York, the yellow metal spot price had slipped $3.70 cents to $424.55/425.30.

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