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LONDON - Oil rose nearly 2 per cent to beyond US$53 today, as cold weather in top consumer the United States raised demand for heating fuel.
US crude was up US$1 at US$53.58 a barrel by 1541 GMT after falling 82 cents yesterday. London Brent crude was up
US$1.10 at US$53.80.
The US cold snap that started last week may have come too late to lift the bearish mood of some investors. But weekly US stocks data, due for publication on Wednesday, is expected to show a drop in distillate inventories, including heating oil.
"It would have to be a big drop to surprise the market. The market is pretty well supplied for winter," said Tobin Gorey, analyst at Australia's Commonwealth Bank.
A warm start to the US winter and a shift in investment flows have wiped 13 per cent off the price since the start of 2007. US oil sank last week to a low of US$49.90 after trading activity across commodity markets reached record levels.
On crude markets, the rise in open interest -- or the number of contracts that have not been closed -- has been driven by a combination of speculative short positions and new long positions, analysts said.
The latest regulatory data on the New York Mercantile Exchange showed a big drop in the number of short positions, suggesting that at least for now, the sell-off is stalling.
"While the downward momentum has not fully reversed yet, it has significantly weakened over the last five trading days," said Olivier Jakob of Petromatrix.
Ministers from the Organisation of the Petroleum Exporting Countries believe the market will stabilise once the full effect of the group's 1.7 million barrels per day output reduction is felt. Oil has fallen 32 per cent from its US$78.40 record in July.
Opec President Mohammed al-Hamli said a reasonable price for Opec's crude basket is US$55 a barrel -- at least US$5 higher than the current level for the reference price, which is valued at a US$5-$6 discount to US crude.
"We are not panicking...concerned, I think, because we are embarking on huge investment programmes and the price in that respect is very important because of the outlays," he said yesterday.
- REUTERS