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Late Oil Rally Snaps Four-Day Losing Streak

U.S. crude oil futures ended sharply higher on Friday, rising for the first time in a week as traders covered short positions ahead of a long holiday weekend.

The rebound put a breather on the crude oil market which on Thursday had suffered a 15% loss since the start of the year, hobbled by a warm winter in the Northeast and ample crude and fuel inventories.

On the New York Mercantile Exchange, February crude settled up $1.11 or 2.1%, at $52.99 a barrel, climbing from the day's low of $51.56, the lowest price since May 31, 2005. It hit a session high of $53.11. Prices have fallen for four consecutive weeks.

At the close, prices were down 5.9% from a week ago and 13.2% from the start of the year. Prices are down 17% in the last year. On the day's low, crude futures had tumbled 34% from the record $78.40 struck in mid-July.

Short Covering

"There is short covering ahead of the long weekend along with concern about the possibility of a surprise OPEC meeting," said Nauman Barakat, senior vice president at Macquarie Futures USA.

Amid speculation of an emergency meeting to help stem sliding prices, an OPEC spokesman said on Friday the exporter group's headquarters was unaware of any plan to hold such a meeting later this month.

OPEC agreed to cut production by 1.2 million barrels per day starting in November and is poised to implement another 500,000 bpd cut in February.

The OPEC spokesman was commenting on a Dow Jones report quoting a senior OPEC delegate saying the group is discussing whether to hold an emergency meeting around Jan. 20-21.

The delegate said OPEC was considering several options, one of which is to deepen the group's existing Feb. 1 supply cut of 500,000 barrels a day by an additional 500,000 bpd, according to
Dow Jones.

On Thursday, a report by tanker tracker Roy Mayson of the oil consultants Oil Movements showed that OPEC exports will rise by 350,000 bpd in the four weeks to Jan. 27.

Short of Target

"And that means they will be 700,000 bpd short of the Nov. 1 target on Feb 1," Mason said, adding that exports had lost some 850,000 bpd by late December before rising again.

Some cooler weather has moved into the the key heating oil consuming region of the U.S. Northeast. Heating demand in the region was forecast to average below normal Friday and Saturday, then near normal Monday and near to above normal on Tuesday, private forecaster DTN Meteorlogix said on Friday.

The six-to-10-day DTN forecast was for temperatures to average below normal.

NYMEX floor trading will be closed on Monday for the U.S. Martin Luther King Jr. Day holiday.

Electronic trading on CME's Globex and the NYMEX Clearport platforms won't be affected by the holiday and will run as usual starting at 6 p.m. New York time Sunday to 5:15 p.m. Monday.

Trading of NYMEX crude futures hit a record 800,731 contracts on Thursday, combining volumes on the electronic Globex and open outcry on the trading floor.

In London, ICE traded 377,672 WTI and 345,407 Brent crude futures contract, also records, putting the grand total for crude in the two markets at 1.5 million contracts.

The record volumes come amid rising open interest and despite a sharp decline in prices, signaling investors are not fleeing but rather going into short positions.

Technicals

NYMEX February crude support was charted at $50. Resistance was charted at $54.

Heating oil support was slated at $1.47. Resistance was expected at $1.55.

RBOB's support was charted at $1.3850. Resistance was charted at $1.45.

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