12-5-05 - Oil prices briefly spiked above $60 a barrel Monday amid reports that a snowstorm would hit the U.S. Northeast, the world's largest heating fuel market, and boost demand for crude oil and natural gas.
With winter weather settling in, natural gas, the other main fuel of choice, also headed upward.
After rising to $60.08 a barrel, light, sweet crude for January delivery fell back to $59.96 a barrel by afternoon in Europe in electronic trading on the New York Mercantile Exchange. That was still 64 cents above its Friday close, when it jumped 85 cents to settle at $59.32.
January Brent rose 84 cents to $57.89 a barrel on the ICE Futures exchange in London.
After some snow over the weekend in the Northeast, Accuweather.com said the season's first big snowstorm was headed toward the Mid-Atlantic states and New England in the next two days. The report said snow would reach Washington, D.C., by midday Monday and New York City by the evening.
"The bulls are back in the market with just a little bit of cold weather," said energy analyst Victor Shum of Purvin & Gertz in Singapore. Ken Hasegawa of Tokyo-based brokerage firm Himawari CX said the price of January Nymex crude may break through the $60.50 a barrel level.
In recent weeks, oil prices have been dictated largely by weather patterns in the U.S. Northeast. Spells of warmer weather have depressed prices, while forecasts for cold snaps have raised them.
"Refineries will have to run hard to produce heating oil to meet demand" as winter kicks in, Shum said. "This chews up more of the crude, which in turn drives up crude prices."
Nymex heating oil rose by more than 2 cents to $1.7950 a gallon while a gallon of gasoline fetched $1.6171, up less than a penny.
"The weather is driving up pricing in the entire energy complex," Shum said, noting that natural gas futures, commonly used by homes in the U.S. Midwest, have surged as U.S. temperatures dropped.
Natural gas futures advanced nearly 31 cents to $14.238 per 1,000 cubic feet Monday, moving closer to their Oct. 25 record settlement of $14.338.
Last Thursday, the U.S. Energy Information Administration said inventories of natural gas fell by 49 billion cubic feet to 3.225 trillion cubic feet in the previous week, 2 percent below year-ago levels.
Traders are also looking ahead to the Organization of Petroleum Exporting Countries meeting in a week's time in Kuwait. Most analysts are not expecting OPEC to cut output when it meets. Typically, the organization considers cutting output when stocks start building and prices fall.
Looking toward Russia, a major non-OPEC supplier, PVM Oil Associates in Vienna noted production there _ at a daily 9.63 million barrels for November _ was the "highest oil output in post-Soviet history."
Crude futures are about 16 percent below their all-time high of $70.85 in late August after Hurricane Katrina battered the Gulf coast.