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Crude Oil, Gas Gain as Colder Weather Spurs Demand for Heating

Crude Oil, Gas Gain as Colder Weather Spurs Demand for Heating

Nov. 21 (Bloomberg) -- Crude oil gained and U.K. natural gas jumped to an eight-month high as forecasts for colder weather in Europe and the U.S. stoked expectations heating demand will climb.

Freezing temperatures were recorded in parts of Britain and Germany and may continue through the week, the U.K.'s national weather service said today. Fuel consumption for heating in Boston, Buffalo and New York City will be above normal this week, Minneapolis-based forecaster Meteorlogix LLC said.

``If we pass into a cold snap, it's going to underpin prices,'' said Jonathan Copus, an oil analyst with Investec Securities in London. Heating oil supplies are average, ``but it wouldn't take much to fall short.''

Crude oil for January gained as much as 73 cents, or 1.3 percent, to $57.94 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It traded at $57.87 at 10:58 a.m. in London. Prices are 19 percent higher than a year ago.

U.K. natural gas for delivery today at the National Balancing Point surged as much as 70 percent from Nov. 18 to 1.20 pounds ($2.06) a therm, according to APX Gas.

Oil prices were underpinned on concern hurricane-damaged platforms in the Gulf of Mexico won't be repaired quickly enough to meet demand. Daily Gulf output last week had its smallest gain in eight weeks and remains 47 percent below normal after disruptions caused by Hurricanes Katrina and Rita, the U.S. Minerals Management Service said.

Freezing Weather

Temperatures of zero degrees Celsius (32 degrees Fahrenheit) or less were recorded this morning in at least one location in all nine of the U.K. regions tracked by Britain's Met Office. A low of -6 Celsius was recorded in the southeast, in Redhill and Benson, according to information on the Met Office Web site.

Nighttime temperatures in Frankfurt may drop as low as minus 7 Celsius and will also fall below freezing in cities including Munich and Berlin, the Met Office forecast.

Germany is Europe's largest heating oil market and the world's second biggest, after the U.S. Britain is Europe's No. 1 natural gas market.

Last month, the U.K. Met office said Britain may experience its coldest winter in a decade.

``If you look beyond Thursday, you can't see any mild weather for as far ahead as the models look, which is 16 days,'' said Adrian Crocker, a senior meteorologist with U.K.-based British Weather Services. ``By Friday, we're into a straight northerly flow, straight from the Arctic.''

U.S. demand for distillates, which include heating oil and diesel, has peaked in January in four of the past five years, according to U.S. Energy Department data.

The U.S. is the world's biggest oil user, accounting for about a quarter of global consumption. Its stockpiles of crude oil and distillate were 10 percent and 7.7 percent respectively higher than a year earlier in the week ended Nov. 11.

Gulf Production

While U.S. fuel supplies are in the middle of the range for this time of year, there is limited spare capacity there or globally to cope with any weather shocks or supply disruptions, said Andrew Harrington, a resources analyst at Australian & New Zealand Banking Group Ltd. in Sydney.

The amount of oil production shut in the Gulf of Mexico fell 18,472 barrels a day, or 2.5 percent, to 717,807 barrels, according to data compiled by the U.S. Minerals Management Service. That's about 53 percent of normal output.

Oil prices in New York have declined 18 percent from the record $70.85 reached on Aug. 30, the day after Hurricane Katrina made landfall and wrecked rigs and platforms in the Gulf of Mexico.

Higher fuel production for the week ended Nov. 11 reduced the gap between existing and average supplies of U.S. distillates, including heating oil and diesel. Stockpiles climbed 2.5 million barrels to 123.4 million barrels, according to the U.S. Energy Department.

Brent crude oil for January today rose 79 cents, or 1.4 percent, to $55.67 a barrel on London's ICE Futures exchange.

Regular gasoline at the pump in the U.S., averaged nationwide, fell to $2.21 a gallon yesterday from $2.22 a day before. Prices are down about 28 percent from a record $3.057 a gallon on Sept. 2, according to the AAA, the nation's largest motoring organization.

To contact the reporters on this story:
Bill Murray in London at at [e-mail];
William Kennedy in Singapore at [e-mail];


LINK: http://www.bloomberg.com/apps/news?pid=10000087&sid=avdkT0iwuGmo&refer=top_world_news