UPDATE 9-U.S. oil futures fall $1, heating oil leads losses

Thu Jan 9, 2014 5:33pm EST

Related Topics

* U.S. crude oil futures hit eight-month low

* Supply concerns over North Sea oilfield output assuaged

* Brent premium to WTI highest since early December

* U.S. jobless claims fell last week

* Coming up: U.S. non-farm payrolls data on Friday (Updates to settlement prices, adds U.S. oil touches an eight-month low, adds analysts' quotes)

By Elizabeth Dilts

NEW YORK, Jan 9 (Reuters) - Oil futures prices on both sides of the Atlantic fell by more than $1 on Thursday, driven by ballooning stocks of heating fuels.

The market pared losses just ahead of the session close as traders focused on Libya's resolve to get oil exports on track, which would further dampen prices and bought back contracts to cover short positions.

Unrest at Libyan ports seized by protesters has capped losses in Brent, though some traders say they anticipate exports from those ports to resume by the weekend.

Warmer weather in the U.S. has eased prices for heating fuels following record-breaking arctic temperatures at the beginning of the week.

U.S. heating oil futures and London gas oil futures fell to their lowest since mid-November, weighing on crude oil prices. As well, U.S. natural gas futures prices sank 5 percent to below $4 per million British thermal units. Gas is used to heat the bulk of U.S. homes in winter.

"You have a stronger dollar, no geopolitical stress, a break in the weather and builds in heating oil and gasoline," said Rich Ilczyszyn, chief market strategist at iitrader.com in Chicago.

"All that is leading oil down."

The U.S. dollar index rose to its highest since mid-November on Thursday, weighing on oil prices. A stronger dollar means that commodities priced in the U.S. currency grow more expensive for holders of other currencies.

Brent crude for February delivery fell 76 cents to settle at $106.39, after volatile trading in which the contract swung by more than $2, between $106.12 and $108.20.

U.S. oil fell 67 cents to settle at $91.66, after earlier touching an 8-month low of $91.24. By 4:41 p.m. EST (2141 GMT), it traded up to $92.33. U.S. crude met resistance on a technical chart after hitting the 8-month low, prompting some buying, traders and analysts said.

"We took out the December lows and didn't really follow through," said Phil Flynn, an analyst at the Price Futures Group in Chicago, Illinois.

"It looks like we hit key support and people reversed their positions a little bit, perhaps ahead of tomorrow's jobs report."

Worries over Libyan supply and ballooning U.S. production helped to push Brent to its highest premium to U.S. crude since early December, above $15 per barrel CL-LCO1=R.

The spread eased to $14.73 by day's end.

SUPPLY CONCERNS; JOBS

Brent crude oil pared gains after rising early in the session prompted by supply concerns. Nexen reported an outage at the North Sea Buzzard oilfield, the largest Forties crude blend producing field. Forties is the most important of the North Sea crudes underpinning the Brent benchmark.

Nexen said it was in the process of restarting production and would return to normal levels over the next few days.

Investors will look to U.S. non-farm payrolls data to be released on Friday at 8:30 EST (1330 GMT) for signs of continued recovery in the world's largest economy, which may bolster speculation over further cuts in the Federal Reserve's commodity-friendly stimulus program. (Additional reporting by Simon Falush in London and Jacob Gronholt-Pedersen in Singapore; Editing by David Evans, Jason Neely and Chris Reese)

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