Oil Prices Edge Higher After Fall

Oil prices edged up Friday, recovering from declines in the previous session after the U.S. Energy Department reported the biggest increase in crude inventories in more than four years.

Traders appeared eager to buy to cover earlier commitments ahead of the weekend, accounting for the increase.

Light, sweet crude for February delivery rose 17 cents to $50.47 a barrel in electronic trading on the New York Mercantile Exchange by afternoon in Europe. On Thursday, the contract briefly fell below $50 a barrel for the first time since May 2005 before settling at $50.48.

February Brent crude on London's ICE Futures exchange added 45 cents to $52.20 a barrel in Friday's trading.

Heating oil futures were up by over a penny at $1.4857 a gallon while natural gas prices rose 14 cents to $6.4570 per 1,000 cubic feet.

Crude futures have slipped for eight of the first 12 trading sessions of 2007, partly on mild winter temperatures in the U.S. Northeast, a key consumer of heating fuels, and growing fuel stockpiles.

Skepticism about the Organization of Petroleum Exporting Countries' commitment to delivering 1.2 million barrels of production cuts that were supposed to have started in November also weighed on oil prices.

Confirming speculation that mandated cuts were not being met, OPEC said Friday that production from the group in December was 490,000 barrels a day above its October output goal.

OPEC, which has placed compliance with the October decision as key to stemming the recent tumble in oil prices, said in its January report that output from its 10 quota-bound members was 26.79 million barrels a day in December, down 111,000 barrels a day from November.

Most oil analysts say OPEC has fallen short of its compliance with the October agreement by between 400,000 and 700,000 barrels a day.

Victor Shum, an analyst with Purvin & Gertz in Singapore, said the dramatic increase in U.S. crude inventories "is a result of imports going up and indicates that OPEC production cuts have not really come through."

"In the short term, market sentiment is overwhelmingly bearish and it's possible for (the) price to go lower than $50. A lot is based on OPEC's plans to cut production," Shum said. "If OPEC maintains supply discipline and sticks to production cuts, the oil market will gain."

But Vienna's PVM Oil Associates noted some resistance to prices falling below the $50 level while suggesting that - in the absence of positive market fundamentals - "next week could see another downward move."

In its latest snapshot of supplies, the U.S. Energy Information Administration said crude stockpiles rose by 6.8 million barrels to 321.5 million barrels in the week ended Jan. 12. It was the biggest barrel-by-barrel gain since October 2002. Analysts had been expecting an increase of just 325,000 barrels, according to a Dow Jones Newswires survey.

Gasoline stockpiles rose by 3.5 million barrels and distillates, which include heating oil and diesel, rose by 900,000 barrels. Both were at or above the upper end of the average range for this time of year, the EIA said.

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Associated Press writer Derrick Ho in Singapore contributed to this report.