Oil prices soared more than a dollar a barrel on Monday on worries a cold snap in the United States could fire up demand for heating fuels in the world’s biggest energy market.
Light crude on the New York Mercantile Exchange jumped $1.26 to $33.78 a barrel, within 30 cents of nine-month highs hit in December, while London Brent crude rose $1.57 to $30.86 a barrel.
Forecasts that cold weather in the U.S. Midwest would sweep into the key Northeast heating region later this week fed the price strength, triggering concern the chill would strain low U.S. inventories of oil and natural gas.
“Cold,” was the one-word explanation for the price surge from one New York trader.
“The mentality is that we have tight inventory levels and we have some colder than normal temperatures expected in the next few days,” said Tim Evans, senior energy analyst at IFR-Pegasus in New York.
Private forecaster Meteorlogix said on Monday it expected temperatures in the Northeast, the biggest heating oil consuming region in the world, to be 8 to 15 degrees Fahrenheit below normal between Wednesday and Friday.
The forecast confirmed predictions from weather watchers last week, when trade volumes and hours on the oil markets were cut short by the New Year’s holiday.
The weather worries come as dealers eye shrinking petroleum stockpiles and lack of assurances from OPEC cartel members that they could ease output quotas to quell the market.
The U.S government said last week that crude inventories fell 3.8 million barrels in the week to December 26 as refiners ran down stocks before the end of the year to avoid tax penalties.
The decline left U.S. crude stocks 8.9 million barrels below year-ago levels, in addition to inventory deficits for refined products.
The OPEC cartel, which controls 40 percent of the world’s oil exports, announced on Monday that prices had stayed above its target $22-$28 range for a basket of crudes for the 20th, 21st and 22nd consecutive working days.
Under OPEC rules the group can consider increasing production if the price stays above the band for 20 working days, but a cartel official said no change is expected in output quotas.
OPEC ministers decided in December to leave output unchanged, saying high dollar-denominated oil prices were justified by the weakness of the dollar against other major currencies, which reduces oil producers’ purchasing power.
The dollar hit a fresh record low against the euro, after falling 17 percent in 2003.
OPEC meets on Feb. 10 when it is expected to consider cutting production to prepare for lower seasonal demand during the second quarter.
Post-war sabotage at Iraqi oil facilities helped tighten oil supply in the second half of 2003, while strong economic growth in China boosted fuel demand.