* Concerns about global economy blur oil demand outlook
* U.S. cold spell supports crude
* WTI/Brent spread continues to narrow
By Jacob Gronholt-Pedersen
SINGAPORE, Feb 6 Brent crude held steady above
$106 a barrel on Thursday as worries over global economic growth
dented the demand outlook, with its premium to U.S. crude
continuing to narrow as more cold weather hit the United States.
The oil market has mostly escaped the recent selloff in
risky assets, which was sparked by emerging markets turmoil and
a mixed picture on global economic growth.
"Commodities have largely been unaffected by the emerging
market turmoil so far. Industrial metals are likely to be most
affected, while the energy market is getting support from the
fact that the global economy presumably is back on the right
track," said Mark Keenan, head of commodities research in Asia
at Societe Generale.
Brent crude was trading 5 cents higher at $106.30
per barrel at 0332 GMT, having settled up 47 cents the session
U.S. crude rose 18 cents to $97.56 a barrel, after
closing up 19 cents. The benchmark was supported as severe snow
and ice storms in the Northeastern states boosted demand for
heating fuels. The storms had left almost a million homes and
businesses without power on Wednesday.
U.S. stocks of distillates fell 2.4 million barrels last
week - more than expected - and inventories of the fuels on the
East Coast declined to their lowest level since April 2003 due
to the continued cold spell, data from the Energy Information
Administration (EIA) showed.
"Recent cold weather has increased demand of distillates in
the United States, and that has kept the petroleum complex
elevated," said Keenan.
Demand for jet fuel, however, was hit with 2,880 flights
cancelled on Wednesday throughout the United States.
Oil markets were also supported by a pickup in the U.S.
services sector in January, with steady strength in
private-sector hiring, suggesting the winter weather that socked
the country over the few several weeks had a limited effect on
Crude stocks at Cushing fell 1.6 million barrels to 40.3
million barrels last week, reflecting the start-up last month of
TransCanada Corp's 700,000 barrel-per-day Gulf Coast
pipeline, which had been expected to ease a glut at the Oklahoma
Support for U.S. crude narrowed the gap to the international
benchmark CL-LCO1=R to $8.74 per barrel on Thursday. The
spread touched $7.94 per barrel on Wednesday, the narrowest
since Oct. 10, before closing at $8.87 per barrel.
The narrowing gap comes as many investors have pulled out of
heavy speculation in the spread.
"We have seen a clear step back from the speculative
community, including hedge funds, simply because they lost so
much money on trading the spread. As a result, the spread is now
more driven by fundamental factors, and this will keep
volatility in the spread lower," said Keenan, who expects the
spread to narrow further.
Elsewhere, Syria on Wednesday missed a deadline to hand over
all the toxic materials it declared to the world's chemical
weapons watchdog, putting the programme several weeks behind
schedule and jeopardizing a final June 30 deadline.
Investors will also keep an eye on the outcome of Thursday's
European Central Bank policy meeting and whether policymakers
would consider further stimulus to help a still-fragile euro
(Reporting by Jacob Gronholt-Pedersen; Editing by Joseph