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OIL FUTURES: Crude Hits 4-Week High On Cold Temperatures January 31, 2007

Posted by notapundit in Economic News.

NEW YORK (Dow Jones)–Cold weather continued to boost crude oil futures Wednesday, helping them steam to a new four-week high after U.S. government data showed distillate inventories, which include heating oil, fell more than expected.

The prospect of fresh Organization of Petroleum Exporting Countries production cuts, due to start Thursday, supported prices, as did a Federal Open Market Committee statement that was more upbeat on growth and inflation than the previous statement.

Heating oil futures led crude higher for most of the session as the National Oceanic and Atmospheric Administration continued to forecast below-normal temperatures in the U.S. Northeast into mid-February. Winter came late to the region, which is the source of 80% of the nation’s heating oil use, and an extended cold snap is helping pare early January crude and heating oil losses made on low demand for the fuel.

The front-month March light, sweet crude contract on the New York Mercantile Exchange rose $1.17, or 2.1%, to $58.14 a barrel, crude’s highest settlement since Jan. 3, which was the first trading day of the year. Brent crude on the ICE futures exchange rose $1.01 to $57.40 a barrel.

“People are still focusing on distillates and looking ahead to next week when there will likely be an even-bigger drop,” said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. “The funds sold in early January thinking winter would never start, and now we’re starting to see a psychological change” as forecasts for colder temperatures continue.

Prices started their rise after the U.S. Energy Information Administration said distillate stockpiles, which include heating oil and diesel, fell by 2.6 million barrels last week, compared with expectations of a 2.1 million-barrel fall in a Dow Jones Newswires survey. Demand for the fuel jumped 11% from a week earlier to the highest since pre-winter gains recorded Oct. 27.

OPEC is due Thursday to add 500,000 barrels a day of crude oil production cuts to 1.2 million barrels a day it was supposed to have cut from November 2006. While most analysts and tanker trackers believe the cartel has fallen well short of its first cut, Saudi Arabia added support to prices this week when it said it will cut 158,000 barrels a day from Feb. 1.

“The combination of Saudi cuts, bullish weather, escalating Middle East tensions and stronger-than-expected economic growth readings for the U.S. and China certainly raise the risk of being short in the energy complex,” said John Kilduff, senior vice president of energy at brokerage Fimat USA in New York.

Crude prices rallied 5% Tuesday to a four-week high, partly on expectations cold weather would lead to a big draw in distillate stockpiles.

February heating oil rose 1.66 cents, or 1%, to $1.6546 a gallon, its highest settlement price since Dec. 26. It was the February contract’s last day as the front-month futures.

Gasoline stockpiles rose by 3.8 million barrels, the EIA said in its weekly report, compared with analysts’ expectations of a 1.6 million-barrel build. Crude oil stocks built by 2.7 million barrels, up from expectations of a 1.2 million-barrel build.

Front-month February reformulated gasoline blendstock for oxygen blending, or RBOB, fell 2.04 cents, or 1.3%, to $1.5009 a gallon.

Following are prices for selected Nymex and ICE contracts and their comparison to values at the prior day’s settlement. Highs and lows include levels hit in overnight trade.

Prices for crude oil are in dollars a barrel and the change is in cents; prices for Nymex products are in cents a gallon and the changes are in points; prices for ICE gasoil are in dollars a ton and the change is in cents.

Nymex Prices:
Contract Settle Change Vs Low High
Mar crude oil 58.14 +117 55.75 58.20
Apr crude oil 58.85 +119 56.53 58.91
Feb heating oil 165.46 +166 161.34 168.00
Mar heating oil 168.38 +380 161.80 168.50
Feb RBOB 150.09 -204 148.00 153.00
Mar RBOB 155.24 -16 151.25 156.80

ICE Prices:
Contract Settle Change Vs Low High
Mar ICE Brent 57.40 +101 55.16 57.55
Apr ICE Brent 58.36 +116 56.10 58.50
Feb gasoil 511.75 +1900 500.00 515.25
Mar gasoil 515.50 +1850 503.75 519.25

By Matt Chambers, Dow Jones Newswires


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