Oil rises on freezing weather in Europe, US

Tuesday, 21 December 2010 00:02 - - {{hitsCtrl.values.hits}}

(Reuters) - Oil prices rose on Monday as forecasts for freezing temperatures in Europe and the U.S. Northeast this week looked set to boost heating fuel demand.

U.S. crude for January delivery climbed 15 cents to $88.20 a barrel by 0748 GMT, adding to gains from the previous session. The January contract expires at the end of trading on Monday.

ICE Brent for February rose 13 cents to $91.80.

“Prices are going back up because of the really bad weather in the United States and Europe,” said Tony Nunan, a risk manager with Tokyo-based Mitsubishi Corp.

The U.S. Northeast, the world’s top heating oil market, was expected to be colder than usual from Dec. 24 to 28, according to weather data released on Friday.

In Europe, Arctic conditions were expected to continue in the north this week, potentially prolonging travelling disruptions during one of the busiest times of the year.

U.S. heating oil futures nudged up 0.13 cents to $2.4750 a gallon, while gasoline rose 1.11 cents to $2.3290 a gallon.

U.S. heating oil demand is forecast at 4.6 percent above normal for the week ending Dec. 25. It was 19.6 percent above normal last week, said the National Weather Service.

“Expectations of strong holiday driving demand and colder weather predictions lifted gasoline futures, which also buoyed the crude market,” said ANZ Commodity Research in its daily market report.

Oil prices also found support from renewed tensions in the Korean Peninsula and positive U.S. economic data.

South Korea launched live firing drills from a disputed island on Monday, despite threats of war from Pyongyang after an emergency U.N. Security Council meeting failed to agree on how to defuse the crisis. “This bit of tension could see investors pulling out of stocks and go into commodities,” Nunan said.

In the United States, the Conference Board’s measure of leading economic indicators jumped 1.1 percent in November, the biggest rise since March and the fifth straight monthly gain for the world’s largest oil user.

It was the latest evidence of steady, if erratic, improvement in the economy’s prospects after a summer lull.