US oil heated up by cold weather, demand; ends near $97

Workers install a natural gas pipeline.
Justin Solomon | CNBC

U.S. oil climbed nearly $2 on Wednesday on expectations that frigid weather in the U.S. Northeast would prompt strong demand for heating fuel, amid forecasts for declining supplies.

The bitterly cold weather in the U.S. Northeast also sent U.S. natural gas prices to a two-and-a-half-year high, traders and brokers said.

Brent oil followed U.S. oil higher after two days of reports underscored strong global oil demand growth. The International Monetary Fund (IMF) predicted higher growth in advanced economies, while China's central bank injected liquidity into money markets to ease bank-to-bank lending in the world's second-largest oil consumer.

A strong U.S. equities market earlier in the day also added to gains, prompting institutional investors to buy contracts and cover short positions.

Oil boom sustainable: Pro
Oil boom sustainable: Pro

Brent crude for March delivery climbed above $108 and was last trading near a 3-week high. U.S. oil futures settled up $1.76 at $96.73, at a 3-week high.

TransCanada said on Wednesday it was shipping crude oil on its 700,000 barrel per day (bpd) Gulf Coast pipeline, which transports crude oil from the U.S. storage hub in Cushing, Oklahoma, to the Gulf Coast. The company expects the pipeline to average 525,000 bpd in its first year of service.

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