Oil Rises Near $94 in Light Holiday Trading

Oil rose to near $94 per barrel in thin trade, erasing earlier declines, though heating oil remained lower as mild weather across the key heating regions of the United States cut fuel demand.

Oil Refinery
Oil Refinery

U.S. light, sweet crude for February delivery was off 28 cents to $93.03. London Brent crude was down.

Nymex and other markets will be closed for Christmas on Tuesday, creating thin and potentially volatile conditions.

Trading volumes were already muted by the closure of the Japanese markets on Monday.

The U.S. government's weather forecaster predicted Monday that U.S. heating demand would be about 17 percent below normal this week.

"There have already been winter storms in the U.S., but the 14-day outlook is for temperatures to be above normal," said Olivier Jakob of oil consultancy Petromatix.

Oil prices have been holding in range below last month's all-time peak $99.29 as dealers weigh tight inventories in the world's top consumer nations against the threat an economic slowdown will cut consumption.

U.S. crude stockpiles are at near their lowest in nearly three years, according to government data, while Japanese crude stocks are near their lowest in more than three decades.

But forecasters, including the International Energy Agency and producer group OPEC, have cut projections for world oil demand growth in 2008, citing the threat of an economic slowdown.

Oil is up more than 50 percent in nominal terms since January and the average price for the first delivery month on the New York Mercantile Exchange is now around $72, up from $66.25 in 2006.

A Reuters poll showed analysts expect oil prices to average above $77 a barrel next year as tight OPEC supplies and Middle East tensions outweigh concerns about a sluggish US economy.

Crude oil speculators on NYMEX cut net long positions last week ahead of the holidays. Net speculative long positions fell some 12,000 lots to around 35,000 lots.