Oil: Prices rise on cold but Opec supply seen steady

LONDON - Oil bounced off a five-month low on Monday as a drop in temperatures spurred heating fuel demand, but assurances from Opec over future output limited gains.

Private forecaster AccuWeather has said the US Northeast, the world's biggest heating oil market, would see slightly lower than normal temperatures for the winter as a whole.

Overnight temperatures have fallen below freezing across Northern Europe, including the region's main market, Germany.

"The market was pricing mild, mild, mild and now winter is here and the market has rallied on that," said Deborah White, senior energy analyst at SG Commodities in Paris.

US crude rallied from Friday's five-month low to a session high of US$58.18 a barrel. It settled up 49 cents to US$57.70 a barrel, while London Brent settled up 46 cents to US$55.34 a barrel.

Crude oil speculators on the New York Mercantile Exchange boosted net short positions to the highest in more than two and a half years in the week ended November 15, Commodity Futures Trading Commission Data showed on Friday.

British gas prices hit an eight-month high on the cold snap and production problems in North Sea fields. British and German power prices also climbed.

Analysts said fundamentals for oil were relatively bearish, however.

"The market has three drivers right now: distillate stocks (including heating oil), demand growth and the weather," Mike Wittner wrote in Calyon's Oil Weekly report. "Stocks are moderately bearish, demand is neutral and the calendar itself is moderately bullish, assuming a normal winter." US crude has drifted from a record high of US$70.85 at the end of August when Hurricane Katrina knocked out much of the United States' Gulf coast oil and gas output and refining. But the US industry is getting back on its feet and fuel stocks are running above levels at the same time last year.

Oil exporters from the Organisation of the Petroleum Exporting Countries said they would not consider a cut at next month's meeting in Kuwait unless prices fell more sharply.

"Supply is more than demand and the market has stabilized. Is there a need to take further measures? I don't think so," Saudi Arabia Oil Minister Ali al-Naimi said on Saturday.

Opec, which has been pumping near full throttle this year to try to moderate prices, agreed in September to offer refiners its remaining spare capacity for the rest of this year, but says there have been no takers.

United Arab Emirates Oil Minister Mohammed al-Hamli said on Monday world oil markets are well-supplied, with stocks higher than the average in recent years in most consuming nations.

- REUTERS