Jan. 21 (Bloomberg) -- Crude oil rose close to an eight-week high as freezing weather in the U.S. Northeast increased consumption of heating fuels and unrest before the Iraqi election disrupted oil shipments from the country.
Heating-oil supplies, which are 13 percent below year- earlier levels, may decline as snow moves into the Northeast this weekend. The U.S. consumes a quarter of the world's crude oil. Iraqi and U.S. officials have said they expect violence to increase before the election on Jan. 30.
``The weather factor is overwhelming everything else,'' said Jim Steel, director of commodity research at Refco Inc. in New York. ``A snowstorm doesn't necessarily mean colder weather, but it has focused the attention of the market. Also, nervousness is increasing as we approach the 30th, which supports prices.''
Crude oil for March delivery rose $1.29, or 2.7 percent, to $48.60 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. The March futures contract is up 7 cents this week. Prices have fallen 13 percent since touching $55.67 a barrel on Oct. 25, the highest since the contract was introduced in 1983.
In London, the March Brent crude-oil futures contract rose $1.38, or 3.1 percent, to $45.70 a barrel on the International Petroleum Exchange.
Twenty-seven of 61 respondents, or 44 percent, said in a weekly Bloomberg survey that oil will rise next week. Twenty- three said prices will fall and 11 forecast they will be unchanged. Eleven of the last 16 surveys correctly predicted the market's direction.
`Serious Situation'
``This is a serious situation because there will be a combination of heavy snowfall and very cold temperatures in the Philadelphia-to-Boston corridor,'' said Michael Palmerino, a forecaster at Lexington, Massachusetts-based Meteorlogix. ``This will probably be as close to a blizzard as we get in the Northeast this winter. I'm expecting 6-to-12 inches throughout the region.''
Temperatures in the Northeast will be 15-to-20 degrees below normal this weekend, Palmerino said. Temperatures in the region will remain below normal until next weekend, he said. About 80 percent of the nation's home-heating oil is consumed in the Northeast.
The average low temperature in New York at this time of year is 25 degrees Fahrenheit (-4 Celsius) and in Boston it is 21 degrees (-6 Celsius), Palmerino said.
Warm Winter
Up until this cold snap, heating-degree days in the U.S. were 8 percent below the 30-year average. Heating-degree days for the balance of the winter, mid-January to March, are forecast to average 6 percent above the 30-year average, according to Earth Satellite Corp. in Rockville, Maryland.
Heating oil for February delivery rose 4.52 cents, or 3.4 percent, to $1.385 a gallon in New York. Prices are 35 percent higher than a year ago. Gasoline for February delivery increased 4.14 cents, or 3.3 percent, to $1.293 a gallon in New York. Prices are 27 percent higher than last year.
Sabotage has halted exports from Iraq's northern oil fields around Kirkuk since a bombing more than a month ago.
``More alarming than the continuing inability to keep pipelines and wells secure are growing indications of serious reservoir damage caused by neglect, misuse and underinvestment,'' Barclays Capital analysts Paul Horsnell and Kevin Norrish said yesterday in a report. ``On a technical, security and political basis, the immediate future for the Iraqi oil industry does seem to be getting grimmer.''
Iraq pumped 1.96 million barrels a day in December, according to Bloomberg data, in line with average production over the past 12 months. Iraq produced 2.4 percent of the world's oil last month. Output is 21 percent below the 2.48 million barrels a day pumped in February 2003, the month before the U.S.-led invasion.
The Persian Gulf nation has the third-biggest crude-oil reserves, according to figures from BP Plc.
OPEC
The Organization of Petroleum Exporting Countries, supplier of more than a third of the world's oil, raised estimates for annual world consumption and the demand for its own oil in a monthly report. Global demand is expected to rise 1.65 million barrels a day, or 2 percent, to 83.64 million barrels a day. Last month OPEC forecast that demand would gain 1.85 percent.
Chinese Demand
Chinese oil demand was estimated at 6.9 million barrels a day for 2005, the report from OPEC's Vienna secretariat said, a 7.2 percent increase from 2004, when it surged 15.5 percent.
``The bullish numbers from China have got the market's attention,'' said Rick Mueller, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts. ``We all thought that Chinese demand would grow more slowly this year but recent reports paint a different picture.''
OPEC ministers will meet on Jan. 30 in Vienna after members agreed on Dec. 10 that the group would cut production by 1 million barrels a day, starting Jan. 1, to prevent a potential post-winter surplus and price crash.
``My feeling is that with prices where they are, the news out of China and other projections for demand growth, OPEC won't cut production,'' Mueller said.
World oil output exceeds demand by at least 1 million barrels a day, according to Rafael Ramirez, Venezuela's oil minister and president of the state oil company, Petroleos de Venezuela SA. Venezuela would support a cut in production quotas by OPEC if necessary, Ramirez told reporters in Caracas. Current oil prices are ``just,'' he said.
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