Oil Eases Below $59, Warmer Weather In View
Oil slipped on Monday to below $59 a barrel, pressured by expectations for warmer weather in the United States and supported by threats to supply in Nigeria.
Energy demand in the U.S. Northeast, the world's biggest heating oil demand region, will be near to below-normal Tuesday through Saturday, forecaster DTN Meterologix said. Analysts are looking ahead to spring, when consumption ebbs.
"Expected cold weather for February is factored into prices already, and cold weather in March is not viewed as a major driver for the oil markets," said Mike Wittner of investment bank Calyon.
"Starting in March, product demand should slump seasonally, as it normally does." U.S. crude for March delivery was down 73 cents at $58.66 a barrel at 1544 GMT. London Brent crude for April was trading down 57 cents at $58.38 a barrel.
Activity was muted because floor trading in New York is closed on Monday for the Presidents' Day holiday, dealers said. Electronic trade remains open. Oil jumped $1.40 on Friday after the United States warned that Nigerian militants plan to expand their attacks on foreign nationals beyond the oil-producing Niger Delta region.
Violence in the delta over the past year has already cut output from Africa's top producer by a fifth, and analysts fear it may escalate ahead of presidential elections in April. Security sources said on Monday that three Croatian workers had been kidnapped in the oil city of Port Harcourt, raising to nine the number of foreigners held by different armed groups.
For the past two and a half weeks, U.S. oil has moved within a trading band of about $57-$60, a level that appears to satisfy many members of OPEC, which holds its next meeting on March 15.
Iranian Oil Minister Kazem Vaziri-Hamaneh said on Saturday he did not expect another OPEC supply cut if prices kept rising, echoing comments from other ministers from the 12-nation group.
OPEC has lowered output by 1.7 million barrels per day in two stages starting Nov. 1 last year and Feb. 1 to prop up prices, though members have yet to implement the cutbacks in full.
Commodities experts at the World Bank believe stability in the Middle East would lead to oil falling back to about $45, the Bank's chief scientist, Robert Watson, told Reuters on the sidelines of a London conference.
U.S. crude fell to a 20-month low of $49.90 on Jan. 18 as a mild start to winter curbed demand. OPEC's supply cuts and colder weather have since lifted prices.
With support for prices from wintry weather coming to an end, fresh developments are needed to push prices outside their recent trading range, say analysts.
"Our feeling is that the market has found a comfort zone between $56 and $60 a barrel on a Brent basis," said Frederic Lassere of SG CIB Commodities in Paris. "Winter is still probably a non-event and OPEC is quiet, probably working on improving its compliance rate."