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Oil Finishes Lower Despite Forecasts of Continued Cold U.S. Weather

Oil gained nearly a dollar and almost broke above $60 a barrel in morning trading, as a blast of arctic weather was forecast to prop up heating fuel demand in top consumer the United States for another 10 days. But the rally ran out of gas and most of the energy complex posted mild losses for the day.

A warm start to the U.S. winter took 19% off U.S. crude prices at the start of January, before cold temperatures finally hit the giant heating oil market in the U.S. Northeast.

"The ongoing cold weather in the U.S. is still the biggest upside factor at the moment. We're finally seeing a more normal climate in the Northeast so that will increase consumption in heating oil and hopefully result in lower inventory numbers," said Andrew Harrington, an analyst at ANZ Bank.

Prices surged $3.60, or 6.5%, last week, rising $1.72 Friday alone.

U.S. heating demand was expected to be about 20% above normal in the week ending Feb. 10, the U.S. National Weather Service said today, as temperatures dipped to their lowest level this winter.

Forecasters said temperatures in the northeastern United States were expected to average below to much below normal for the next six to 10 days.

Nigeria

The market dipped this morning after oil unions in Nigeria, the world's eighth-largest oil exporter, suspended plans Sunday for an indefinite strike.

The unions said they would meet with President Olusegun Obasanjo today to discuss the lack of security in the Niger Delta that has shut down a fifth of the country's oil output.

Although the immediate strike threat has ebbed, analysts say the market will remain on edge over the possibility of further violence before elections in April.

In Iran, the top nuclear official said Sunday the country would not suspend its uranium enrichment work as demanded by a U.N. sanctions resolution.

Tehran's latest defiant statements have revived worries that the world's fourth-largest oil producer would cut oil output in retaliation if the United States, which fears it is trying to build atom bombs, pushed for further sanctions.

Iran says it is seeking only civilian nuclear energy.

Oil prices have rebounded from a slide below $50 a barrel in mid-January, aided in part by a second 500,000 barrels per day (bpd) output cut from the Organization of the Petroleum Exporting Countries (OPEC) that took effect on Feb. 1.

Nigerian Oil Minister Edmund Daukoru said today he was pleased with the recent rise in oil prices and that OPEC would likely keep output unchanged at its next meeting in March.