LONDON (AFP) – Oil began 2010 with a bang on Monday, surging above 81 dollars on expectations of higher energy demand in the northern hemisphere winter, and after Russia cut supplies to Belarus, traders said.
“Oil is celebrating the New Year … as cold weather continues to grip the northeast of America driving demand for heating oil,” said Westhouse Securities analyst David Hart.
New York’s main futures contract, light sweet crude for delivery in February, spiked as high as 81.16 dollars per barrel, a level last seen on October 21. It later stood at 80.76, up 1.40 dollars.
Brent North Sea crude for February won 1.44 dollars to reach 79.37 dollars in London trading. It had earlier touched 79.76 — a high last witnessed on December 1.
“Short term direction stems from colder weather in the United States which is supporting demand for winter heating fuels,” said analysts at the John Hall Associates consultancy.
“The cold snap is expected to continue for some time yet,” they added in a research note to clients.
Freezing weather also gripped Asia on Monday, as record snow disrupted air and road travel, grounding dozens of planes in China and South Korea and forcing schools to close in Beijing.
Crude oil had vaulted above 80 dollars per barrel in earlier trading on Monday, energised by reports that Russia had cut oil supplies to Belarus, other analysts said.
“In this year’s first day of trading, New York crude has gained another 1.50 dollars, encouraged by reports of a dispute between Russia and Belarus on oil prices and transit fees which, if it escalates, could impact on supplies to Germany and Poland,” said PVM analyst David Hufton.
Prices have risen on concerns over the implications of Russia’s move, which has been effective since New Year’s Eve.
However, a spokeswoman for oil refineries in Belarus denied on Monday reports that Russia had cut oil supplies from January 1.
“The information on cutting supplies does not correspond to reality. Oil is arriving both for transit and for refineries,” a spokeswoman for oil processor Belneftekhim told AFP.
Both of Belarus’s oil refineries are working normally and Russian oil is arriving on schedule, the spokeswoman, Marina Kostyuchenko, said.
In a conflicting report, a Belarus oil industry source told the Interfax news agency that neither refinery was receiving Russian oil on Monday morning.
Media reports said Russia had stopped supplies to Belarus from December 31, 2009, with ongoing negotiations to restart deliveries hampered by tariff disagreements.
The incident is the latest in the energy dispute between the two nations over tariff arrangements. Moscow also severed supplies to Belarus in January 2007 following a similar row.