Oil prices neared $59 a barrel Tuesday as the early arrival of a winter storm in the Northeast boosted expectations for increased heating oil demand over the next few weeks. Crude futures saw a second day of gains after sliding to five-month lows last week, though prices are still about 20 percent above year-ago levels. A barrel of light, sweet crude for January delivery added $1.05 to $58.75 on the New York Mercantile Exchange.
Other Nymex prices also advanced, with heating oil rising 3.1 cents to $1.740 per gallon, natural gas up 13.9 cents at $11.47 per 1,000 cubic feet and gasoline adding about a penny to $1.465 per gallon. January Brent on London's ICE Futures exchange rose 80 cents to $56.15 a barrel.
Oil prices have been dictated recently by weather in the northeastern United States, which consumes about three-quarters of the country's heating oil and is the world's biggest market for that type of fuel. Forecasts for a snowstorm during the busy Thanksgiving weekend sparked this week's rise in prices.
AccuWeather had predicted the storm's arrival later this week, but forecasters now say the cold front will bring a mix of rain and snow stretching from North Carolina to Maine on Tuesday. Up to a foot (30 centimeters) of snow is expected in parts of Vermont and New Hampshire, according to AccuWeather meteorologist Brian Lovern.
Limited refining capacity following hurricanes Katrina and Rita stoked worries about supply shortages this winter, and many analysts remain mixed on whether the nation's inventories are sufficient for an expected spike in demand.
But tame temperatures so far this season have allowed reserves to build, one analyst said. Recent reports of growing supplies and falling demand last week pulled crude oil futures below $56 a barrel for the first time since June.
Mian _ who estimates that annual crude demand may taper slightly this year but will return to normal growth in 2006 _ said the main variables for energy prices will be how low temperatures fall this winter and whether record prices have stunted economic growth. Still, some believe prices have bottomed out for the year as the winter cold starts to blanket the United States.
Vienna's PVM Oil Associates estimated that demand for heating oil in the United States would jump by about 7 percent above normal levels in key consuming regions this week. For further clues on the direction of oil prices, the market also was awaiting the release of weekly U.S. petroleum inventory data on Wednesday.
A survey of analysts by Dow Jones Newswires was mixed, with five predicting crude stocks increases and four saying there would be a fall. Distillate stocks, which include heating oil, jet fuel and diesel, are likely to rise, the analysts said.
The London-based Center for Global Energy Studies warned of low distillate stocks in the United States after production was battered from hurricanes Katrina and Rita before refineries normally begin boosting output before winter, the AP reports.
"Distillate output has suffered most from the refinery shutdowns, falling by 600,000 barrels per day from peak summer levels," CGES said. "Imports have only made small inroads upon this supply gap. ... Stocks are now close to the bottom of the seasonal range."