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Oil Prices Climb to $61 Per Barrel

Posted on: Monday, 12 December 2005, 15:00 CST

LONDON - Oil prices climbed by more than $1 a barrel Monday after OPEC agreed to keep its production level steady amid expectations cold weather and economic growth will support demand.

Explosions at an oil terminal north of London on Sunday also raised supply concerns, but authorities said the blasts will not lead to a shortage.

Light sweet crude for January delivery on the New York Mercantile Exchange rose $1.91 to $61.30 a barrel. January Brent crude at London's ICE Futures exchange rose $1.09 to $58.40 a barrel.

Oil ministers from the Organization of Petroleum Exporting Countries agreed Monday to keep oil spigots open and maintain production at the group's highest-ever levels - at least for now.

The widely expected decision was reached at Monday's OPEC ministerial policy and production meeting and made public by Libyan Oil Minister Fathi Hamed Ben Shatwan. But the group reserved the right to consider cuts in early 2006 should robust demand flag and high prices fall.

Meanwhile, a snowstorm was forecast to hit the northern region of the United States on Wednesday, according to Accuweather.com meteorologist Jon Mabry in a report Sunday.

In recent weeks, oil prices have been dictated largely by weather patterns in the U.S. Northeast, which consumes about three-quarters of the country's heating oil. Spells of warmer weather have depressed prices, while forecasts for cold snaps have raised them.

"Forecasters have predicted that weather in the U.S. Northeast, the world's largest heating oil market, will be near to below normal for the next 10 days, meaning that demand for heating oil will increase," said analysts at Sucden Commodity brokers in London.

Nymex heating oil futures gained more than 3 cents to $1.763 a gallon, while gasoline gained more than 3 cents to $1.635 a gallon. Natural gas rose 53.8 cents to $14.85 per 1,000 cubic feet.

Traders were concerned about the damage caused by massive blasts at the Buncefield terminal north of London on Sunday, which prompted panic buying of gasoline at local stations, causing long lines.

The depot, which is the fifth-largest oil storage facility in Britain, holds reserves accounting for about 5 percent of the country's oil supply - or 4 million gallons of gasoline, diesel, kerosene and aviation fuel.

But oil experts said the accident was not expected to prompt a fuel shortage.

"People are worried about the possibility of a supply disruption, but if we look at our inventories of crude, gasoline, diesel, they're not very tight," said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo, adding that Monday's jump in prices was likely a knee-jerk reaction to the blasts.

French oil company Total SA, which operates the Buncefield depot, said it had already put in place contingency plans to re-route supplies that normally run through the plant.

"There shouldn't be any problem with supplies," said Lesley Else, a spokeswoman for Total U.K. "Everyone is working together to ensure minimal disruption."

Source: Associated Press/AP Online

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