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Oil rises $1 on colder weather forecasts

NEW YORK (Reuters) - Oil rose $1 to over $88 a barrel on Thursday as forecasts for colder weather in the giant U.S. Northeast heating oil market overcame worries over the economic health of the world's top consumer.
/ Source: Reuters

NEW YORK (Reuters) - Oil rose $1 to over $88 a barrel on Thursday as forecasts for colder weather in the giant U.S. Northeast heating oil market overcame worries over the economic health of the world's top consumer.

U.S. crude for March delivery settled up 97 cents at $88.11 a barrel, rallying back from a loss of $2.88 over the last two sessions. London Brent crude gained 73 cents to settle at $88.51.

"I think the contract found some support just below $87 a barrel," said Eric Wittenauer, analyst at AG Edwards.

The gains came amid forecasts for colder weather in the U.S. Northeast starting next week, which gave heating oil prices a boost. Additional support came from production shutdowns in Nigeria and the North Sea.

Royal Dutch Shell said on Thursday it was halting 130,000 barrels per day of Nigerian output because of pipeline leaks. Total has also shut around 280,000 barrels of oil equivalent in output from its North Sea oilfields.

Oil fell for the second straight day on Wednesday after a government report showed a large build in crude and gasoline stockpiles.

Analysts said the builds reflect weakening U.S. demand and was the latest in a steady stream of bad news on the U.S. economy despite aggressive interest rate cuts by the Federal Reserve.

"Instead, it seems that problems are getting worse ... We would not be surprised to see a much sharper break in crude oil prices over the next few weeks," said Edward Meir at MF Global.

Oil prices have tumbled from their January record above $100 on mounting concerns of a U.S. recession.

A Reuters poll showed world oil demand growth losing momentum in 2008 as high prices and a slowdown in the world's industrialized nations led by the United States hit consumption.

The poll of 20 analysts forecast average world oil demand growth this year at 1.43 million bpd, down from 1.56 million bpd in a similar poll last August and well short of International Energy Agency's forecast of 1.98 million bpd.

(Reporting by Matthew Robinson in New York, Santosh Menon in London and Jonathan Leff in Singapore; Editing by Marguerita Choy)