LONDON, (Reuters) – Oil prices rose on Monday as forecasts for continued freezing temperatures in Europe and the U.S. Northeast this week looked set to boost heating fuel demand.
U.S. crude for January delivery climbed 48 cents to $88.50 a barrel by 1156 GMT, adding to gains from the previous session. The January contract expires at the end of trading on Monday. ICE Brent for February rose 35 cents to $92.02.
“Weather is cold in the Atlantic Basin and particularly in Europe. However pricing snowmaggedon episodes for oil demand is always a bit tricky as it also translates into lower demand for traveling fuels – jet, diesel, gasoline,” said Olivier Jakob from Petromatrix.
The U.S. Northeast, the world’s top heating oil market, was expected to be colder than usual from December 24 to 28, according to weather data released on Friday.
In Europe, Arctic conditions were expected to continue in the north this week, potentially prolonging traveling disruptions during one of the busiest times of the year.
Gas demand across Britain was expected to hit a record on Monday, causing National Grid to issue its first gas balancing alert this winter.
U.S. heating oil demand is forecast at 4.6 percent above normal for the week ending December 25. It was 19.6 percent above normal last week, said the National Weather Service.
“Expectations of strong holiday driving demand and colder weather predictions lifted gasoline futures, which also buoyed the crude market,” said ANZ Commodity Research in its daily market report.
U.S. gasoline future were up one percent
Oil prices found support from positive U.S. economic data and a monthly Reuters oil price poll showed a jump in estimates for 2011, when analysts expect oil to average $86, almost $3 up from last month’s poll.
“We anticipate that oil prices will remain robust in 2011 as demand from thirsty developing nations continues and inventories are tapped,” said Lloyds Bank Corporate Markets’ senior oil analyst Simon Cooke-Yarborough.
However, relative dollar strength due to new tensions on the Korean Peninsula and worries over eurozone debt capped gains.
“The global risks for the holidays are not small. The Koreans keep on provoking each other, there is still a risk of further tightening measures from China and Europe remains full of surprise with its peripheries and their bond yields,” said Jakob.
South Korea launched live firing drills from a disputed island on Monday, despite threats of war from Pyongyang after an emergency U.N. Security Council meeting failed to agree on how to defuse the crisis.
The euro hit a two-week low as concerns over the euro zone debt crisis persisted following last week’s Irish rating downgrade.