Oil up on cooler US weather

Crude oil rose, rebounding from a 19-month low, on speculation that heating-oil consumption will jump because of cold weather over the US East.

Temperatures are forecast to be lower than normal along the East Coast from January 24 to 28, according to the National Weather Service. The Northeast accounts for 80 percent of US heating-oil use.

Mild weather has curbed heating-oil consumption so far this winter. New York had its third-warmest December on record.

"It looks like someone has turned the weather map around in the last few days," said Aaron Kildow, a broker at Prudential Financial Derivatives LLC in New York.

"We finally have winterish weather here, but it's not like we will run out of heating oil because the start was so late."

Crude oil for February delivery rose 33 cents, or 0.7 per cent, to $50.81 a barrel at 10:01 am on the New York Mercantile Exchange. Futures touched $49.90 yesterday, the lowest since May 25, 2005. Prices are down 4.1 per cent this week and are 24 per cent lower than a year ago.

"There's a bit of a bounce after traders tried to take it below $50 again and failed,'' said Tom Bentz, an oil broker with BNP Paribas in New York. "There is no news item to explain the bounce, just a loss in the downward momentum. The market will probably resume the downward trend when we come back next week."

Opec, which produces 40 per cent of the world's oil, reduced its forecast for 2007 world demand in a report today. Yesterday, the International Energy Agency, which represents developed countries, also cut its demand projections.

Prices plunged yesterday after a government report showed that U.S. supplies of crude oil, gasoline, heating oil and diesel jumped last week.

"Yesterday's inventory numbers were quite bearish, especially for the products, which are building strongly for the middle of winter,'' said Justin Fohsz, a broker at Starsupply Petroleum, a division of GFI Group, in Englewood, New Jersey.

"I think we'll give it another run for $50 today. It has been a very strong barrier."

Brent crude oil for March settlement rose 65 cents, or 1.3 per cent, to $52.40 a barrel on the London-based ICE Futures exchange.