LONDON - Oil eased on Wednesday after U.S. data showed weak mortgage demand in the world's top energy consumer, halting a nine-day rally that has lifted crude futures by 14 percent due to cold weather and geopolitical jitters.
U.S. crude for February delivery fell 0.35 percent to $81.47 a barrel by 1246 GMT (7:46 a.m. EST), after settling up 26 cents on Tuesday at $81.77, its highest closing level since early October 2008.
London Brent crude eased 32 cents to $80.27.
U.S. mortgage rates jumped 0.10 percentage points on average last week, while demand for 30-year mortgages held near six-month lows, a Mortgage Bankers Association survey showed on Wednesday.
The housing sector is still not out of the woods, and is heavily dependent on U.S. government support, said Harry Tchilinguirian, head of research for commodity derivatives at BNP Paribas.
If crude is rangebound, as we say it is, then (this mortgage data) is an opportunity for a slight pullback in the oil market.
U.S. crude oil has risen from a low of $69.57 on December 15 to a 14-month intraday high at $82 on Tuesday.
Arctic winds have pushed down into the northern hemisphere, freezing Europe and parts of Asia and boosting demand for heating fuel in the United States some 21 percent above normal.
But a dent in sentiment appeared following data from the American Petroleum Institute (API), released after the market's close on Tuesday, showed U.S. distillate supplies rose 962,000 barrels last week, against an expected 1.9-million barrel drop.
The latest build in distillate stocks should provide a slap in the face to bulls who relied on cold temperatures as a wonder cure, said David Wech of JBC Energy.
Markets look to weekly Energy Information Administration data (EIA) later on Wednesday, as well as U.S. employment numbers and a gauge of December non-manufacturing activity, to test the recovery of the world's largest economy.
Gasoline inventories in the United States rose 5.6 million barrels in the week to January 1, according to the API data, and heating oil stockpiles dropped 1.3 million barrels. Supplies of crude oil fell by a greater-than-expected 2.3 million barrels.
The NYMEX February heating oil contract is hovering near 15-month highs. On Wednesday it eased slightly to $2.1825 per gallon after settling on Tuesday up 0.16 percent at $2.1941, its highest close since October 20, 2008.
Elsewhere icy weather descended on northern China over the last week, bringing heavy snow and record low temperatures to Beijing and causing cities across eastern and central parts of the country to begin rationing power.
Britain's unusually cold weather spell will likely continue into the second half of January, the Met Office said this week.
Belarus on Wednesday insisted that Russia should continue billions of dollars in oil subsidies, potentially complicating talks aimed at resolving a dispute over a pipeline that brings 10 percent of Europe's crude to market.
(Additional reporting by Jennifer Tan in Singapore; editing by Anthony Barker)