Oil: Price hits six-week high on US deep-freeze

NEW YORK - US crude oil futures rose to a fresh six-week high on Friday as frigid weather swooped into the Northeast heating oil market, threatening to strain already tight winter fuel stockpiles.

Crude futures on the New York Mercantile Exchange settled up 34 cents at US$48.38 a barrel after touching a peak of US$48.55 during the open-call session, the highest level since Dec. 1 and about US$7 below last October's record.

The gains added to Thursday's nearly four per cent surge in the US market. London crude, meanwhile, settled down 6 cents to US$45.15.

A blast of arctic air was pushing through the Midwest and into the Northeast Friday, bringing temperatures down dramatically for what is expected to be a prolonged cold spell, forecasters said.

The Northeast is the world's largest heating oil market.

"So far this January, a lack of intense cold has kept furnaces from working full bore, and that has cut down significantly on home heating costs," said private forecaster AccuWeather. "Winter will make up for that in big dollars and cents in the days ahead."

Dealers are concerned the frigid weather will sap already tight US heating oil supplies, which as of last week were hovering around 7 per cent below the previous year's levels, according to government figures.

Heating oil futures in the US have risen about 13 per cent since the start of the year to about US$1.35 a gallon.

Strength in the oil markets has been underpinned by ongoing supply disruptions from the North Sea, Nigeria and the US Gulf of Mexico which have taken roughly 500,000 barrels of oil per day off the 80 million bpd global market.

Iraqi exports have also been interrupted by continued sabotage on its northern pipeline infrastructure and power problems in the south. Worries that sabotage attacks will intensify before the planned Jan. 30 elections in Iraq have added a premium to prices.

The disruptions coincide with OPEC's implementation of a 1-million-bpd output cut from Jan. 1.

The Organisation of the Petroleum Exporting Countries is scheduled to meet on Jan. 30 to discuss whether further cuts may be necessary as the northern winter ends and oil demand seasonally falls in the second quarter.

Some members say the cartel may consider reducing supplies if prices fall below US$40 a barrel.

OPEC's acting Secretary-General said on Friday world oil markets are adequately supplied despite crude's rise to the highest level since December.

"The world oil market remains adequately supplied with crude, despite supply concerns and the expectation of colder weather in the northern hemisphere," Adnan Shihab-Eldin said in a statement.

- REUTERS