Oil prices steady at US$48/barrel as freezing temperatures hit NE USA

17-Jan-05

Freezing temperatures hit Northeastern United States last weekend, driving up demand in the world's largest heating oil market for a week. At the same time supply disruptions continue. As New York Mercantile Exchange closed for the Martin Luther King Day, crude futures steadied above US$48 a barrel - the highest since the end of November. Light sweet crude for February delivery rose to US$48.38 a barrel by midmorning in Asia. The market is very well-supported, and if there is no increase in supplies, the prices would hold up. Outages in the North Sea and Nigeria, along with continuing production shutdowns in the Gulf of Mexico, have kept nearly 1 million bpd off the markets. Continuing sabotage attacks on Iraq's northern pipeline infrastructure and power problems in the south have reduced exports. Violence could escalate before elections planned for Jan. 30. The disruptions coincide with OPEC's implementation of an output cut of 1 million barrels per day from the beginning of the year. OPEC however, attributed the recent oil price rise to concerns over colder Northern Hemisphere weather and the resulting draw on distillate fuel, which includes heating oil. OPEC ministers are scheduled to meet on Jan. 30 to discuss further cuts. Oil demand generally falls in Q2 of the year as the northern winter ends. If OPEC cuts supplies, the market can expect a bull run.