Cold spell to cushion oil slide

2010-12-29 09:37

Singapore - Oil fell in afternoon Asian trade on Wednesday but the decline was seen as limited with heating oil demand set to stay firm as a cold spell grips the United States and Europe, analysts said.

New York's main contract, light sweet crude for February delivery, sank 8 cents to $91.41 per barrel.

Brent North Sea crude for February was down 8c at $94.30.

Analysts say prices will be underpinned by strong heating oil demand, which has perked up because of the unusually strong cold spell in the northeastern United States and parts of Europe.

"As long as the extreme cold in the northern hemisphere persists, this will lend some support to oil prices in the near term," said Chen Xin Yi, a Singapore-based commodities analyst for Barclays Capital.

US reserves fell by about 15 million barrels in the first half of December in the face of brisk demand and end-of-year inventory adjustments by refiners.

New figures on US stocks are to be published on Thursday.

Oil demand from China, the world's biggest energy consuming nation, is also another factor bolstering prices, she said.

"China's demand growth has scaled a new high in November, topping 9.3 million barrels per day, with diesel, jet fuel and gasoline demand all setting record highs in the month," she said.

Barclays Capital predicts oil prices will average $91 per barrel in 2011.