Oil Energy Thread (oih)

[madrose1]

Oil $60.84 Declines as Warmer Weather Moves Into the U.S. Northeast

By Robert Tuttle

Dec. 12 (Bloomberg) -- Crude oil fell to a two-week low as warm U.S. weather is forecast to reduce heating-fuel demand over most of the next month.

Temperatures in the Northeast, where 80 percent of U.S. heating oil is burned, will probably be above average through Dec. 25, according to National Weather Service forecasts. The temperature in New York will average 58 degrees Fahrenheit (14 degrees Celsius) on Dec. 20, 21 degrees above normal, according to forecaster MDA Federal Inc.'s Earthsat Energy Weather.

Several weather forecasts show ``no real break in the sustained moderated temperatures; it's helping push the market down,'' said John Kilduff, vice president of risk management at Fimat USA in New York. Today's move is ``a continuation of the overall downward trend we have been in.''

Crude oil for January delivery fell 20 cents, or 0.3 percent, to $61.02 a barrel on the New York Mercantile Exchange, the lowest close since Nov. 28. Today's fall was the third straight daily decline.

Brent crude oil fell 32 cents, or 0.5 percent, to $61.52 a barrel on the ICE Futures exchange in London. It was the seventh straight daily drop, the longest series of declines for Brent since November 2005.

Oil also fell after Edmund Daukoru, the Organization of Petroleum Exporting Countries president, said the group has not reached a consensus on a decision to reduce output for a second time this year at its meeting later this week.

``We need to take a very, very critical look'' at inventories, Daukoru said today in Abuja, Nigeria, where the group is expected to meet on Dec. 14. ``We always arrive at a consensus based on the fact that we have an open mind regardless of what is said before the meeting.''

`General Support'

Daukoru, who is also Nigeria's oil minister, earlier said ``general support'' exists among members for a reduction.

OPEC members Iran and Venezuela have called for further cuts, while Qatar, Kuwait and the United Arab Emirates today said they're concerned about an oversupply of oil, without yet demanding reductions. Libya's top OPEC official said there's no need to reduce supply again.

``Another production cut is waiting in the wings here, but not for right now,'' Kilduff said. ``They are going to let this one ride because it's December and it's the peak demand season.

OPEC said in October it would curtail output by 1.2 million barrels a day starting in November. A Bloomberg News survey showed the group trimmed output by 550,000 barrels a day.

Northeast heating demand will average 31 percent below normal over the next seven days, according to forecaster Weather Derivatives in Belton, Missouri.

`Milder' Weather

``At least through the 26th, it still looks to be milder than normal across much of the eastern third of the U.S.,'' said Jason Nicholls, senior meteorologist at AccuWeather Inc. in State College, Pennsylvania. ``After Christmas, it looks like there might be one or two cold shots but I don't think it stays permanently cold.''

Crude oil accounts for about 60 percent of the retail price of heating oil. Heating-oil futures fell 0.19 cent to $1.7224 a gallon in New York.

Crude oil has fallen about 3.3 percent this month as analysts and traders said they expect U.S. fuel inventories to meet demand for heating amid signs of mild weather.

The U.S. Energy Department is scheduled to release a report on last week's petroleum inventories tomorrow at 10:30 a.m. in Washington.

U.S. supplies of distillate fuel, including heating oil and diesel, probably declined 250,000 barrels last week, based on the median estimate from the Bloomberg News survey of 15 analysts. Stockpiles held 132.4 million barrels in the week ended Dec. 1, 0.9 percent more than the five-year average for the period.

Crude oil inventories probably fell 1.3 million barrels, based on the survey. Stockpiles held 339.7 million barrels on Dec. 1, 14 percent above the five-year average.