Oil prices stable as traders eye new US pipeline

Global oil prices steadied on Monday after the completion of a major US pipeline expansion project that will cut oversupplied inventories in the United States, the world's biggest crude consuming nation. In late afternoon London deals, Brent North Sea crude for delivery in February rose 22 cents to $110.86 a barrel. New York's main contract, light sweet crude for February or West Texas Intermediate (WTI), eased 23 cents to $93.33 a barrel. The Seaway Pipeline expansion completed on Friday means 400,000 barrels of crude oil can now be brought each day from the oversupplied midcontinent market around Cushing, Oklahoma, to refiners on the Gulf Coast. Previously, only 150,000 barrels could be transported to refiners, leading to a build-up in stocks. "Crude prices have been going up because the pipeline... started up with expanded capacity, reducing the crude inventory in Cushing," said Victor Shum, managing director of IHS Purvin and Gertz research group in Singapore A fall in inventory stocks usually indicates an increased demand for oil that supports prices. The oil market also won additional support on Monday from stubborn supply worries in the crude-rich Middle East region. The world's biggest oil exporter Saudi Arabia meanwhile denied that a 5.0-percent cut in its crude output was aimed at boosting price levels. "Fluctuations in production depend on domestic demand, which is seasonal in nature as it peaked in the summer before declining during the last quarter of the year," oil ministry adviser Ibrahim Mehanna told AFP. He said it was "totally wrong" to link the fall in Saudi oil output to an attempt to raise prices. "Several challenges to growth in the eurozone and fears about the US financial crisis have affected the demand for oil," he said. He said Riyadh was "fully prepared to respond to these changes and reaffirms its commitment to meet the demands of its customers." "We are still firmly committed to ensuring the stability of the oil market." Analyst Matt Smith of Schneider Electric said on Monday that a reported five percent drop in December Saudi oil production -- about nine million barrels per day -- was to "help support prices" by reducing supply.