The Associated Press
Monday, December 17, 2007
SINGAPORE: Oil prices rose Monday as another winter storm pummeled the U.S. with snow, sleet and freezing rain — weather conditions that were expected to boost fuel demand.
Around a foot (30 centimeters) of snow had fallen on parts of the Chicago area, with 10 inches (25 centimeters) in Vermont. The U.S. National Weather Service on Sunday posted winter storm warnings from Michigan and Indiana all the way to Maine. Meteorologists said 18 inches (46 centimeters) was possible in northern New England; more snow was still expected in parts of Michigan.
The storm came less than a week after an ice storm was blamed for at least 38 deaths, mostly in traffic accidents, in the middle of the country. Thousands of homes and businesses still had no electricity in parts of Oklahoma, Kansas and Missouri.
“The market has edged up in response to the winter stormy weather in the U.S.,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
The “storm will stir heating oil use, and these expectations have temporarily overtaken worries about the state of the U.S. economy,” he said.
Light, sweet crude for January delivery added 52 cents to US$91.79 a barrel in Asian electronic trading on the New York Mercantile Exchange by midafternoon in Singapore.
The contract fell 98 cents to settle at US$91.27 a barrel Friday after the U.S. government reported consumer inflation jumped in November by the largest amount in more than two years.
Energy traders are concerned rising inflation will cut consumers’ buying power and reduce demand for gasoline and oil. They also worry that higher inflation means the Federal Reserve will stop cutting interest rates. Many analysts cite the Fed’s recent rate-cutting campaign, and its role in depressing the value of the dollar, as a major factor behind oil’s rise in November to a record above US$99 a barrel.
The movement in oil prices is now being constrained by a split in opinion on the direction that crude futures will take in coming months, Shum said.
“In the near term, pricing should hold relatively stable because we have a stalemate between two camps in the oil market — one camp thinks the U.S. economy will tank next year, possibly go into recession … and that will hurt crude demand,” he said.
“The other camp believes the oil market remains tight and fundamentals will hold up pricing.”
Many economists believe U.S. economic growth in the current October-December quarter could fall below 1 percent at an annual rate, sharply below growth of 4.9 percent in the third quarter. The U.S. economy is struggling under the weight of a meltdown in housing, a severe credit crunch and faltering consumer confidence.
Heating oil futures added 1.75 cents to US$2.6254 a gallon (3.8 liters) while gasoline prices added 0.98 cent to US$2.3515 a gallon. Natural gas futures lost 5.1 cents to US$6.974 per 1,000 cubic feet.