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Oil Prices Soar on Cold Weather Fears

Posted on: Wednesday, 7 December 2005, 12:00 CST

LONDON - Crude oil futures rose Wednesday on expectations that cold weather in the U.S. Northeast will boost demand for heating fuels and on expectations that an inventory report would show a drop in petroleum inventories.

Televised al-Qaida threats against Mideast oil facilities apparently led to surge of buying earlier in the day, but the Al-Jazeera network later said the excerpts came from a tape originally broadcast in September.

Light, sweet crude for January delivery rose 59 cents to $60.53 a barrel on the New York Mercantile Exchange. January Brent at London's ICE Futures gained 79 cents to $58.40 a barrel.

Heating oil gained nearly 2 cents to $1.7888 a gallon (3.8 liters) while gasoline rose the same amount to $1.6004 a gallon. Natural gas increased 36 cents to $13.852 per 1,000 cubic feet.

While cold weather in the United States is expected to raise demand for heating fuel, increased production and sufficient imports could prevent a big spike in prices for now, analysts said.

Traders were awaiting the midweek U.S. petroleum inventory report, expected to show rises in distillate and gasoline stocks as refineries revved up production in anticipation of more wintry weather.

According to a Dow Jones survey of analysts, distillate inventories were expected to gain 1.13 million barrels in the week that ended Dec. 2, while gasoline would be up 1.16 million barrels.

Analysts also expected the boost in refinery runs to burn through more crude oil stocks, causing commercial petroleum inventories to slide for a second straight week, dropping by an estimated 950,000 barrels.

Production facilities on the Gulf Coast have partly recovered from damage earlier this year by Hurricanes Katrina and Rita, but still have a long way to go, Energy Intelligence said on its Web site.

"The recovery in production has been particularly significant in recent days and weeks, but a substantial volume of supply - about a quarter of the gas and a third of the oil - is still off, underscoring the severe damage from this year's hurricanes," the group said.

In a videotape posted on the Internet Wednesday, Al-Qaida's deputy leader called for attacks against Gulf oil facilities and urged insurgent groups in Iraq to unite to drive out American forces.

The posting was a full version of a video by al-Qaida No. 2 Ayman al-Zawahri that was issued Sept. 19, excerpts of which were broadcast by Al-Jazeera at the time. The network aired more excerpts Wednesday, originally presenting all the footage as new. A newscaster later told viewers some of the excerpts had previously been broadcast.

Source: Associated Press/AP Online

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