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Oil falls as distillate supplies rise, energy stocks inch lower in London

Oil prices inched slightly lower today following Tuesday’s gains as February Brent Crude slid to US$80.39/barrel, while US light, sweet crude declined to US$81.62/barrel.

The decline in oil prices was triggered by yesterday’s update from the API (American Petroleum Institute), which revealed an unexpected increase in distillate supplies by 1 million barrels and in gasoline inventories by 5.6 million barrels. This was enough to offset any positive impact from the fall of 2.3 million barrels in US crude stocks.

The nine day winning streak for oil prices was driven by the unusually cold weather in key energy consumers including Europe, the United States and China, which boosted the demand for heating oil.

Further direction for the oil prices will be set by today’s report from the US Energy Informaiton Administration.

Major oil stocks retreated in response to lower oil prices. Supermajors BP (LSE: BP) and Shell (LSE: RDSB) lost less than 1%, as did fellow FTSE 100 constituents BG Group (LSE: BG) and Cairn Energy (LSE: CNE), while Tullow Oil (LSE: TLW) was down 1%.

Amec (LSE: AMEC) was flat, while another services company Petrofac (LSE: PFC) slid to the bottom of the pile with a 3% loss.

Midcap energy producers were mixed. JKX Oil and Gas (LSE: JKX) and Dana Petroleum (LSE: DNX) were down about 1%, while Premier Oil (LSE: PMO) declined marginally. Dragon Oil (LSE: DGO) and Salamander Energy (LSE: SMDR) did better, tacking on nearly 1%, as did Wood Group (LSE: WG), which fellow services company Wellstream Holdings (LSE: WSM) declined 1.3%.

Africa and FSU operating oil and gas junior Victoria Oil & Gas (AIM: VOG) was oneof the strongest performers among the juniors with a 6% climb after updating the market on progress at its flagship Logbaba gas project in Cameroon.

Peru, Colombia and Cuba operating oil and gas explorer and producer Gold Oil (LSE: GOO) and Kazakhstan operating Max Petroleum (LSE: MXP) headed in the different direction, shedding 11% and 9% respectively. Atlantic Canada operating oil and gas group Enegi Oil (AIM: ENEG) and Ukraine focused gas producer, Regal Petroleum (AIM: RPT) both lost more than 4.5%.

Disclosure: I do not hold a position