Oil: Price sheds on milder US forecast

UPDATE - Oil prices fell on Monday, reversing some of last week's sharp gains as a cold spell in the US Northeast heating oil market was forecast to lift by the middle of the week.

US crude settled down 64 cents to US$45.64 a barrel, erasing some of last week's 13 per cent gains, and London Brent lost 94 to US$42.45 a barrel."The market is offsetting Friday's gains, which were much overdone and fuelled by weather," said Jim Ritterbusch, president of Ritterbusch and Associates. "We're taking that weather premium back out of the market."

US home heating needs should be below normal this week in New England, according to the US National Weather Service forecast.

Oil rallied more than USUS$5.50 a barrel last week on wintry weather in the US Northeast, home to about 78 per cent of American heating oil consumers.

Forecasts now are for Monday's frigid temperatures to warm to above normal for the season by the middle of the week.

Dealers shrugged off supply scares.

YUKOS defaulted on two crude cargoes that had been scheduled to sail from the Baltic port of Primorsk this month after failing to pay duties, traders said.

Under relentless assault from Moscow to pay a multi-billion dollar tax bill, the company was stripped in an auction on Sunday of its main oil production unit Yuganskneftegaz.

In Saudi Arabia an internet statement at the weekend purportedly from the Saudi wing of al Qaeda urged militants to attack oil facilities in the world's biggest exporter.

"We call on all the mujahideen in the Arabian Peninsula to unify their ranks ... and target the oil supplies that do not serve the Islamic nation but the enemies of this nation," said the statement.

State-run oil company Saudi Aramco said that its oilfields and refineries were guarded by "multiple levels" of armed company security personnel closely working with government security forces.

Riyadh is battling a 19-month wave of violence by supporters of the al Qaeda movement. Gunmen have killed foreigners in the Red Sea petrochemical hub of Yanbu and the oil city of al-Khobar, but there have been no reports of direct attacks on oil facilities.

In Iraq, another sabotage attack on Saturday blew up a northern export pipeline for the second week in a row, halting flows of crude oil to the Turkish port of Ceyhan.

- REUTERS