Oil Is Little Changed as Heating Oil Gains on Outlook for Cold

Dec. 29 (Bloomberg) -- Crude oil was little changed at a five-week high as heating oil climbed on U.S. forecasts for cold weather and the dollar strengthened against the euro.

Oil increased for a fifth day as heating oil rose to a two- month high on the outlook for below-normal temperatures for much of the nation next week. Reports signaling that the U.S. economy may be rebounding from the worst recession since World War II bolstered the dollar, curbing the appeal of commodities.

“Another arctic blast is supportive,” said Phil Flynn, vice president of research at PFGBest in Chicago. “Still, we’re up a little bit on the dollar, and that’s a reason for people to get out of the upside on crude.”

Crude oil for February delivery rose 10 cents to $78.87 a barrel on the New York Mercantile Exchange, the highest settlement price since Nov. 18.

Prices were little changed from the settlement after the American Petroleum Institute reported at 4:30 p.m. that U.S. crude-oil stockpiles increased 1.73 million barrels to 330.5 million. February oil fell 1 cent to $78.76 a barrel in electronic trading at 4:39 p.m.

Heating demand is expected to be above normal in the Northeast, Southeast and central U.S. for most of the week through Jan. 5, David Salmon, a forecaster at Weather Derivatives in Belton, Missouri, said in a report today.

A “major arctic wave” heading for the U.S. will likely cause millions of households to boost heating fuel use this winter, according to a report by State College, Pennsylvania- based AccuWeather.com. A pattern forecast to linger until February will cause highs in the 20s Fahrenheit (minus 7 to minus 2 Celsius) in northeastern cities, AccuWeather said.

Heating Oil

Heating oil for January delivery rose 2.93 cents, or 1.4 percent, to settle at $2.1028 a barrel on the Nymex, the highest level since Oct. 21. It has gained 8.1 percent in the past five trading days.

“This was the major catalyst for all energy markets,” said Richard A. Ilczyszyn, a senior market strategist with Lind- Waldock & Co. in Chicago. “Once the heat took off, everything else took off.”

The dollar gained 0.2 percent against the euro to $1.4344 at 2:54 p.m. in New York from $1.4378 yesterday. Earlier, it touched $1.4332.

Confidence among U.S. consumers rose for a second month in December as pessimism over the outlook for jobs diminished, according to the Conference Board, a New York-based research group. Its confidence index increased to 52.9, in line with the median forecast of economists surveyed by Bloomberg, from 50.6 in November.

Home Prices

The S&P/Case-Shiller home-price index, a measure of home values in 20 U.S. cities, increased 0.4 percent in October from the previous month on a seasonally adjusted basis. It has risen every month since June.

“It’s a sign that the bottom has been met and the worst is over,” said Brad Samples, a commodity analyst for Summit Energy Inc. in Louisville, Kentucky. Oil prices climbed as much as 0.8 percent earlier today on the economic news.

The Reuters/Jefferies CRB Index of 19 commodities fell 0.2 percent to 283.9. It was the first decline since Dec. 21.

Oil prices have tripled in the past decade. They’re up 77 percent this year and poised for the best annual performance since 1999 as the accelerating economy raises demand. The International Energy Agency increased its forecast for 2010 global oil use to 86.3 million barrels a day on Dec. 11, 130,000 barrels more than its previous estimate.

Oil retreated from the day’s high after failing to break through technical resistance at about $80 a barrel, said John Kilduff, a partner at Round Earth Capital, a New York-based hedge fund that focuses on food and energy-commodity investments.

$80 Resistance

“That $80 level has really been formidable resistance,” he said. “We broke through it in October but have never really been able to hold through it.”

Oil reached a one-year high of $82 on Oct. 21, as rising equities boosted investor confidence and a falling dollar encouraged buying of physical assets.

Brent crude for February settlement increased 32 cents, or 0.4 percent, to $77.64 a barrel on London’s ICE Futures Europe exchange.

Earlier today, oil prices declined as Russia reached an agreement with Ukraine on oil exports to Europe, allaying concern of a supply disruption. Russia agreed to pay 30 percent more to transport oil to Europe via Ukraine next year, according to Ukrainian state energy company NAK Naftogaz Ukrainy.

Distillate Supplies

U.S. inventories of distillate fuel, including heating oil and diesel, probably dropped 2.23 million barrels last week from a five-month low of 161.3 million, according to the median of 14 estimates by analysts in a Bloomberg News survey before an Energy Department report tomorrow. Thirteen respondents forecast a decrease and one said there was a gain.

U.S. oil inventories probably fell 1.85 million barrels in the week ended Dec. 25 from 327.5 million the prior week, according to the survey. Twelve respondents forecast a decline and two said there was an increase.

Oil volume in electronic trading on the Nymex was 207,018 contracts as of 2:45 p.m. in New York. Volume totaled 202,088 contracts yesterday, 65 percent below the average of the past three months. Open interest was 1.2 million contracts.