Oil Energy Thread (oih)

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Crude Oil Futures Rise for a Second Day on Colder U.S. Weather

By Christian Schmollinger

Oct. 25 (Bloomberg) -- Crude oil rose for a second day on speculation colder U.S. weather will boost heating oil demand.

Below-normal temperatures until Oct. 31 in the Northeast, the nation's largest heating oil consumer, will boost heating demand 30 percent above normal for this time of year, researcher Weather Derivatives said. World crude oil demand peaks in the fourth quarter, when refiners in the U.S., Europe and north Asia prepare to supply winter fuel.

``If heating oil does move higher, there could be some pull on crude,'' said Dariusz Kowalczyk, chief investment strategist at CFC Seymour Ltd. in Hong Kong. ``We're entering the heating season, where heating oil is the driver of the energy complex.''

Crude oil for December delivery rose as much as 26 cents, or 0.4 percent, to $59.61 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was trading at $59.56 at 12:40 p.m. in Singapore. Yesterday, the contract rose 54 cents, or 0.9 percent, to $59.35 a barrel, the first gain in three days.

Heating oil for November delivery rose for a second day, by as much as 0.4 percent, to $1.7017 a gallon, after rising 1.6 percent yesterday.

Oil prices have fallen 24 percent from the record $78.40 reached on July 14. Futures slid the past two months as fuel stockpiles in the U.S., the world's biggest oil consumer, rose and forecasters including the Organization of Petroleum Exporting Countries trimmed their demand projections, citing slower global economic growth.

In London, Brent crude for December settlement climbed as much as 32 cents, or 0.5 percent, to $60.18 a barrel on the ICE Futures exchange. It was at $60.15 at 12:30 p.m. Singapore time.

Inventories

An Energy Department report later today will probably show crude oil supplies gained 2.9 million barrels last week, based on the median estimate from a Bloomberg News survey of 10 analysts. Distillate supplies, including heating oil and diesel, may have dropped by 1.25 million barrels, their third straight decline, according to the survey.

On Oct. 13, U.S. oil stockpiles held 335.5 million barrels, or 14 percent more than the five-year average for the period. Supplies of distillates were 145.4 million barrels, 15 percent more than five-year average.

Product demand averaged 21.4 million barrels a day in the week ended Oct. 13, the highest in two months. Refiners used 86.3 percent of their plant capacity that week, the lowest since mid-April. Refineries may have operated last week at 87 percent of capacity, according to the Bloomberg survey.

``Lower refinery output related to the lower capacity utilization will mean a big decline in inventories of heating oil and gasoline, especially if demand for heating oil is strong,'' said CFC Seymour's Kowalczyk.

U.S. Weather

AccuWeather meteorologists predicted Oct. 18 that most of the U.S. will have a cooler-than-normal winter. The El Nino weather pattern in the Pacific Ocean will be weaker than expected, providing colder temperatures.

This year, AccuWeather is forecasting January temperatures in New York of 30 to 31 degrees Fahrenheit, or 1 or 2 degrees below the 30-year average.

AccuWeather is also projecting above-normal snowfall for the Northeast. There's even a possibility that New York City could extend its four-year record of winters with snowfall above 40 inches. The 30-year average is about 22 inches.

AccuWeather said an area stretching from the western Great Lakes to the Pacific Northwest would likely have above-normal temperatures. That was in line with a forecast from the U.S. National Weather Service's Climate Prediction Center for warmer weather for the western half of the continental U.S. and Alaska.

To contact the reporters on this story: Christian Schmollinger in Singapore at [e-mail] .