Oil Prices Up on Cold Weather Forecast

By GEORGE JAHN

VIENNA, Austria – Oil futures rose Thursday, with forecasts of cold weather in the U.S. Northeast outweighing bearish sentiment bred just a day earlier by news of increased U.S. crude oil and gasoline stocks.

Light, sweet crude for December delivery rose 49 cents to $61.15 a barrel in electronic trading on the New York Mercantile Exchange by afternoon in Europe. The contract had fallen $1.78 to settle at $60.66 a barrel on Wednesday.

Heating oil and gasoline were up more than 2 cents at $1.8815 and $1.6050 a gallon respectively.

Natural gas was down 12 cents at $13.918 per 1,000 cubic feet.

Brent crude on the International Petroleum Exchange was selling for $59.38, up 51 cents.

Oil prices are well below the late August peak of $70.85 a barrel, but analysts said the approach of the Northern Hemisphere winter was expected to keep a firm floor under prices, primarily because of heating oil demand in Europe and the United States.

"The worry is that if prices come off a bit, demand will rebound and we’ve still got to deal with the Northern Hemisphere winter," said commodities strategist David Thurtell of the Commonwealth Bank of Australia in Sydney.

The U.S. National Oceanic and Atmospheric Administration is predicting this year’s winter in the U.S. will be colder than last year, but warmer than the 30-year average. Analysts warn an unexpectedly cold winter could drive up prices.

"Heating oil prices (already) are rising again due to weather forecasters predicting lower-than-normal temperatures in the U.S. Northeast until the weekend," said Vienna’s PVM Oil Associates.

The U.S. Energy Department’s inventories data showed declines in distillate stocks, which likely bolstered Thursday’s bullish market outlook, traders said.

U.S. supply of distillate fuel, which includes heating oil and diesel, shrank by 1.6 million barrels to 121.1 million barrels, or about 1 percent higher than last year.

But the data showed large builds in crude and gasoline stocks.

Crude oil inventories grew by 4.4 million barrels last week to 316.4 million barrels, or 12 percent above year-ago levels. Gasoline inventories increased by 200,000 barrels to 195.9 million barrels, or 4 percent lower than last year.

"The buildup of crude is very impressive," Thurtell said, adding it was likely due to a jump in imports and lack of use by U.S. Gulf of Mexico refineries still recovering from damage caused by hurricanes Katrina and Rita.

According to a U.S. Minerals Management Service report Wednesday, 68 percent of daily oil production and 56 percent of daily gas production in the Gulf of Mexico remained shut-in.

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Associated Press Writer Gillian Wong in Singapore contributed to this report.