Crude Oil Prices Up As Winter Worries Rise

By EN-LAI YEOH

SINGAPORE – Crude oil prices edged up Tuesday as weather watchers predicted a colder than normal winter in the northeastern United States, raising concerns that supplies will be inadequate due to hurricane damage to U.S. refineries.

Benchmark light, sweet crude for front-month November delivery rose 10 cents to $61.90 a barrel in electronic trading on the New York Mercantile Exchange. Earlier, future rose as much as 52 cents to $62.32 a barrel.

The contract had fallen 4 cents to close at $61.80 in New York Monday amid signs of lower demand due to higher prices.

On London’s International Petroleum Exchange, Brent for November traded 12 cents higher at $58.90 a barrel.

Respected forecaster Accuweather.com said in its 2005-2006 winter forecast that "colder-than-normal temperatures" were expected over the northeastern U.S., which consumes most of the country’s winter heating fuel.

"The northeast has seen more snowfall than average in four of the past five winters, and that trend looks to continue again this winter," Accuweather said in its report. "Factors in the North Atlantic leads to enough cold in the region so that even if it is drier than normal, it will snow more than normal."

A colder winter would result in increased consumption of home heating fuels, putting pressure on prices and U.S. refineries’ ability to produce the fuel. Hurricanes Katrina and Rita knocked out or shut down a number of the country’s largest refineries, undermining supply.

Heating oil rose by than half a cent Tuesday to $1.9760 a gallon, gasoline rose by just under a cent to $1.806 while natural gas was up 12 cents to $13.08 per 1,000 cubic feet.

Also, the Minerals Management Service said more than a million barrels of crude remains shut in from the hurricanes in the Gulf of Mexico. It amounts to nearly 78 percent of the daily total.

On Thursday, the U.S. Department of Energy will release its weekly petroleum stocks report, that is likely to show a drop in crude, gasoline and distillate inventories, a Dow Jones Newswires poll showed. This is normally a time when inventories grow, as refineries boost production ahead of winter.

The U.S. federal Energy Information Administration will release its short-term outlook Wednesday that is likely to forecast slowing demand in the coming months.

Prices rose all of 2004 and into 2005 from rising demand, geopolitical unrest and a series of weather-related outages that began with Hurricane Ivan last year. This year, Hurricane Katrina sent crude surging to a record $70.85 on Aug. 30 when the storm made landfall.

Now some analysts are warning that developments in Nigeria, Africa’s largest exporter of crude and a major supplier to the United States, could affect prices.

"With global oil markets still focused on post-hurricane recovery in the U.S., potentially worrying developments in Nigeria are commanding less attention," Energyintel analyst Jane Collin wrote in a research note from London.

"Nigerian courts have just accused rebel leader Mujahid Dokubo-Asari of treason," added Collin. "His arrest last month led to protests that affected Shell and Chevron, and the fear is that the severity of the charges brought against him will incite more violence."