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Oil, Heating Oil, Natural Gas Rise as Cold Front Boosts Demand

Oil, Heating Oil, Natural Gas Rise as Cold Front Boosts Demand

Dec. 8 (Bloomberg) -- Crude oil, heating oil and natural gas rose as cold weather in the northern U.S. bolsters heating- fuel demand and refiners try to increase production.

Temperatures in New York and Boston will fall to 25 degrees Fahrenheit (minus 4 Celsius) on Dec. 10, forecaster Meteorlogix LLC said. U.S. refineries operated at 90.6 percent of capacity last week, down from 94 percent a year earlier, according to an Energy Department report. Almost 30 percent of the country's capacity was shut in September after hurricanes made landfall.

``The bone-chilling cold should reduce distillate stocks,'' said Jim Steel, director of commodity research at Man Financial Inc. in New York. Refinery output is ``still down from last year even though they have done quite a job getting them back up and running. These factors are raising concern.''

Crude oil for January delivery rose 54 cents, or 0.9 percent, to $59.75 a barrel at 12:13 p.m. on the New York Mercantile Exchange. Prices are down 16 percent since touching a record $70.85 a barrel on Aug. 30, the day after Hurricane Katrina struck Louisiana and Mississippi. Oil is up 42 percent from a year ago.

Heating oil for January delivery jumped 2.34 cents, or 1.4 percent, to $1.76 a gallon in New York. Heating oil reached a record $2.21 on Sept. 1. Futures have gained 40 percent in the past year.

`Snow's Coming Tomorrow'

``Snow's coming tomorrow and it now looks like the cold weather will stay around longer than we expected,'' said Michael Palmerino, a forecaster at Lexington, Massachusetts-based Meteorlogix LLC.

Temperatures in the Northeast should be 2 to 6 degrees below normal through next week, Palmerino said. The normal low in New York at this time of year is 32 degrees Fahrenheit (0 Celsius) and in Boston the low is usually 28 degrees (minus 2 Celsius), he said.

Home-heating demand in the Northeast, where 80 percent of the nation's heating oil is used, will be 17 percent above normal through Dec. 14, Weather Derivatives, a forecaster in Belton, Missouri, said today. Yesterday, heating demand was forecast to be 12 percent above normal in the region.

``More than 25 percent of production is still out in the Gulf and it looks like we are in for consistent cold,'' said Michael Fitzpatrick, vice president of energy risk management at Fimat USA in New York. ``By the end of the heating season we could be in for some problems.''

U.S. oil production in the Gulf of Mexico yesterday was down 476,035 barrels a day, or 32 percent of the region's total, because of Hurricanes Katrina and Rita, according to the Minerals Management Service. About 2.48 billion cubic feet of natural gas a day is shut, or 25 percent of the Gulf total.

Natural Gas

The rise in prices accelerated after the Energy Department reported that U.S. natural gas inventories declined. Natural-gas and oil prices often move in tandem because as many as 10 percent of U.S. factories and power plants can switch between burning oil and gas. Natural gas is used to heat 55 percent of U.S. homes.

Natural gas inventories fell 59 billion cubic feet to 3.166 trillion last week amid mild weather. Analysts had expected supplies to fall by 65 billion cubic feet, the median of 21 estimates in a Bloomberg survey.

Natural gas for January delivery surged 68 cents, or 5 percent, to $14.38 per million British thermal units in New York. Futures touched $14.55, the highest since Oct. 5, when they reached an all-time high of $14.75. Prices have more than doubled in the past year.

Crude-Oil Supplies

U.S. crude-oil supplies rose 2.7 million barrels to 320.3 million in the week ended Dec. 2, the department said in a report yesterday. The report also showed that heating oil and gasoline supplies increased.

The Louisiana Offshore Oil Port, the biggest U.S. oil import terminal, stopped unloading one sweet crude-oil grade because there is no available storage, a port official said. Sweet crude oil is low in sulfur.

Gasoline for January delivery rose 2.34 cents, or 1.5 percent, to $1.591 a gallon in New York. Gasoline surged to a record $2.92 a gallon on Aug. 31. Prices are up 46 percent from a year ago.

Regular gasoline at the pump, averaged nationwide, rose 1.1 cent to $2.149 a gallon yesterday. Prices are down 30 percent from the record $3.057 a gallon on Sept. 2, according to the AAA, the nation's largest motorist organization. Pump prices are 13 percent higher than a year ago.

Brent crude oil for January delivery rose 89 cents, or 1.6 percent, to $57.87 a barrel on the London-based ICE Futures exchange, formerly the International Petroleum Exchange. Brent surged to a record $68.89 Aug. 30.

To contact the reporter on this story:
Mark Shenk in New York at [e-mail].


LINK: http://quote.bloomberg.com/apps/news?pid=10000103&sid=abMD3yytuvM8&refer=news_index