Oil futures rallied more than 50 cents in the last half hour of pit trading to finish with a 2% gain on the day. Prices were driven higher by cold weather enveloping the Northeast, short covering ahead of the weekend and a technical bounce after Thursday's dollar-plus drop.
Arctic air has moved into much of the U.S.--especially in the Northeast, where heating oil use is concentrated--and should stimulate some heating oil demand after a mild start to the winter in December and early January.
Heating demand in the U.S. Northeast will average from above to much above normal during the next five days, private forecaster DTN Meteorlogix predicted today.
The six-to-10-day Meteorlogix forecast was for temperatures to average below normal.
Natural gas, heating oil, and gasoline are also trading up strongly.
Today's gains reverse Thursday's drop of $1.14, when traders took profits after the prices strengthened the previous two days.
Prices were also pressured Thursday after a report from Roy Mason of oil consultants Oil Movements saying that OPEC exports will rise 270,000 barrels per day in the four weeks to Feb. 10 with no sign yet of the promised February cut hitting supply.
Mason estimated OPEC's seaborne exports on a four-week average would rise to 24.56 million bpd, up from 24.29 million bpd to Jan. 13.
Venezuela's energy minister late Thursday said OPEC output cuts were beginning to support prices. Rafael Ramirez estimated the world market was oversupplied by 700,000 bpd, down from its earlier calculation of as high as 1 million bpd.
U.S. inventory data released Wednesday from the U.S. Energy Information Administration showed total distillate, gasoline and crude oil supplies rose last week. But refinery capacity use was lower, prompting some traders to point to that as supportive for products going forward, despite the high levels of supply versus the same period in 2006.
Oil markets may get some support from a report of robust U.S. durable goods data.
During Friday's session, oil markets also must assess continuing concerns about continuing Middle East turmoil, highlighted this week by unrest in Lebanon, and the threat to oil facilities and workers from militants in OPEC member Nigeria.
Technicals
NYMEX March crude resistance was pegged at $56. Support remained charted at $52.
Heating oil resistance at $1.60, breached on Thursday, remains ready for another test. Support was charted at $1.50.
RBOB's resistance was pegged at $1.50 and support was charted at $1.40.