Colder US weather pushes up oil prices

Oil prices rose to near $99 a barrel on Monday on signs of colder weather in the United States and Europe and the continued weakness of the dollar.

The Thanksgiving holiday on Thursday marked the unofficial start of winter in the US. Among other areas, south-eastern New Mexico got up to 23cm of snow and experienced colder-than-normal temperatures over the holiday weekend. Snow also fell in Germany over the weekend.

“The onset of cold US weather is going to boost fuel demand,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Light, sweet crude for January delivery added 13 cents to $98,31 a barrel in electronic trading on the New York Mercantile Exchange, mid-afternoon in Europe, after reaching a high of $99,11 earlier on Monday.

On Friday, the contract rose by 89 cents to settle at $98,18 a barrel, besting the previous settlement record by 15 cents.

January Brent crude fell by six cents to $95,70 a barrel on the ICE Futures exchange.

Meanwhile, the dollar hit a new low against the euro on Friday as speculation continued that the American credit crisis will lead to another cut in US interest rates.

“The weakened US dollar remains at record low levels and so we’ve got pricing trying to test $100 again,” Shum said.

Oil futures offer a hedge against a weak dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the US currency is falling.

Nymex crude prices reached a trading record of $99,29 a barrel on Wednesday, and are within the range of inflation-adjusted highs set in early 1980.
Depending on how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.

“Almost anything could push prices higher from here and we have to expect to see a move to” $100 per barrel this week, said Peter Beutel, president of US energy risk-management firm Cameron Hanover, in a research note, listing a US Federal Reserve interest-rate cut, a weaker dollar, colder weather forecasts or “any petro-political problem” among the factors that could push oil prices to three digits.

“We have reached the point, though, where the inability to touch or break $100 this week would be seen as rather a spectacular failure,” Beutel wrote. “There is no reason for prices not to hit $100 this week.”

Shum said that data suggesting the Organisation of the Petroleum Exporting Countries (Opec) is increasing production more quickly than expected is likely to keep a temporary cap on oil prices.

Oil Movements, an oil-tanker tracking firm based in Britain, reported that Opec oil exports are likely to jump by an average of 720 000 barrels a day in the four weeks ended December 8, more than the expected 500 000 barrels per day.

Oil prices rose by 43% between August and early November on falling domestic inventories, concerns about supply disruptions overseas and, many analysts argue, speculative buying. But recent forecasts have suggested high prices are cutting demand.

Nymex heating oil rose 1,08 cents to $2,7150 a gallon (3,8 litres), while gasoline prices gained 0,58 cents to $2,4728 a gallon. Natural-gas futures rose 19,9 cents to $7,899 per 1 000 cubic feet.—Sapa-AP

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