OIL PRICES Crude futures increase above $44 per barrel

Traders expect a tight supply of oil during the winter.
ASSOCIATED PRESS
Oil futures prices bolted 5 percent higher Wednesday, climbing above $44 a barrel after U.S. government data showed a slight decline in crude and heating oil supplies as colder weather in the Northeast drove up fuel demand.
With the official start of winter less than a week away in the Northern Hemisphere, traders focused on the tight supply of heating oil and sent crude futures $2.37 higher to $44.19 per barrel on the New York Mercantile Exchange. Heating oil futures surged 8.39 cents to $1.3884 per gallon.
"The weather's getting colder and inventories are still low," said Tom Bentz, a broker at BNP Paribas Commodity Futures in New York, where the temperature dipped below 32 degrees on Wednesday. "So, you're getting a recovery" in oil prices, which are down about 20 percent from the late October high above $55 a barrel.
Inventories of crude oil in the United States are 6 percent above year ago levels even though the Energy Department reported Wednesday that supplies fell by 100,000 barrels last week to 293.8 million barrels.
Distillate fuel
However, the nation's supply of distillate fuel, which includes heating oil and diesel, is 12 percent below year ago levels, unchanged from a week ago at 119.3 million barrels. High-sulfur distillates typically used for heating oil declined by 100,000 barrels to 49.9 million barrels, or 13 percent lower than a year ago.
Carl Larry, associate director of energy futures at Barclays Capital in New York, said it is unlikely that distillate fuel stocks will grow in the weeks ahead, assuming normal winter weather patterns prevail. Distillate fuel demand has already been 7 percent higher than a year ago over the past four weeks due to rising consumption of diesel and jet fuel, Larry said.
Another "eyebrow raising" detail in the Energy Department report was data showing strong demand for gasoline despite high pump prices. Daily gasoline demand averaged 9.1 million barrels over the past four weeks, up 2 percent from a year ago.
Expectations
Wednesday's rally in energy prices may also have been influenced by expectations that, as colder weather drives up home-heating demand in the United States this week, the government's next supply report could show even steeper drops in heating oil inventories.
Traders "are building into the price an expectation of a decline next week," said Ed Silliere, vice president of technical research at Energy Merchant Corp. in New York.
Previously rising U.S. inventories of crude oil and distillate fuel had been a factor in lowering crude futures by about $13 per barrel from the record closing high of $55.17 in late October.
In an effort to prevent further declines in the price of oil, particularly next spring when a seasonal dropoff in demand is expected, the Organization of Petroleum Exporting Countries agreed to rein in its production by 1 million barrels a day beginning next month.
Bentz said OPEC's decision may have helped prices from falling below $40 a barrel, setting the stage for this week's move higher.