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US crude futures jumped away from 2009 lows in early Asian trading on Tuesday as the peak winter month took over as the prompt delivery contract, but milder weather than usual was capping heating demand and the price outlook for early 2016.
US West Texas Intermediate (WTI) crude futures
Despite the bounce, which is seen as typical as contracts roll over for expiry on December 20 2016 and amid the peak winter demand, analysts said unusually mild weather would drag on prices.
Oil analysts at BNP Paribas said that the amount of US heating degree days had been 30% below the 10-year average since December 7 and that days requiring heating were expected to remain 23% below normal until January 4.
"In the next two weeks as a whole, the US, Europe and Russia will be particularly milder than normal," the bank said.
An unusually mild start to the winter has dominated the northern hemisphere, caused in part by the El Nino weather phenomenon, keeping heating oil demand lower than the norm.
This weak demand pattern is seen clashing with an expected rise in supplies once Iran's oil exports start to fully return after a lifting of western sanctions against Tehran.
Bank of America Merrill Lynch said Iranian output could go up by 600,000 barrels per day, from a current volume of around 1 million barrels per day, over a period of six months once sanctions are lifted.
The International Energy Agency said this week that it expected Iran's exports to rise by half a million barrels per day within 6-12 months of sanctions being lifted.
Iran's barrels would add to an already over supplied market that has seen prices fall by two-thirds since mid-2014, undercutting lows seen during the 2008 financial crisis and pulling oil to levels last seen more than a decade ago.
