Augmented by OPEC's stand on defending prices and expected colder weather later this month, oil prices climbed towards US$46 a barrel, breaking beyond the market's month-long US$40-$45 trading range. US light crude rose to US$45.72 a barrel. Prices were also helped by supply disruptions across the globe, with output in the North Sea running 345,000 bpd below normal late last week due to bad weather, while 145,000 bpd of US Gulf of Mexico production remained closed due to damage from last September's Hurricane Ivan.
Despite a warmer than usual winter in the US Northeast, concerns thrive regarding a cold snap that could strain heating oil inventories that are 9% below last years levels. Weekend storms on the West Coast and in the mid-Atlantic areas served a reminder that winter is not yet over. Continued risk of a US cold spell as the winter fuel supplies thin down is abound in the biggest consumer of heating oil in the world.
As crude oil inventories are well above last year's levels, OPEC members fear a possible price collapse when the northern hemisphere winter ends and global demand starts waning in the second quarter. OPEC might have to cut production quotas if US oil prices fell below US$40 a barrel. Saudi Arabia, Opec's biggest producer, will in all probability not back cuts if oil prices prevail in the range of US$40s for fear that sustained high fuel costs could hurt global economic growth.