Oil demand report makes oil prices up

Photo: Oil demand report makes oil prices up

World oil demand will increase by 170,000 barrels a day, the International Energy Agency said, rising its previous forecast of 2.3 percent to 2.5 percent. The oil prices rose immediately.

Dow Jones Newswire reported the overall demand was expected to reach 87.8 barrel a day.

The upward revision was based on an expected increase in demand for ethane and other petrochemical feedstocks in the Middle East , notably Saudi Arabia , the security watchdog for the Organization for Economic Cooperation and Development, or OECD, said, the AP reports.

The forecast predicted continuing robust oil demand growth in non-OECD countries, where subsidies protect people from the impact of high oil prices, and normal winter weather.

On Friday, light, sweet crude for January delivery rose 79 cents to US$93.04 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe.

The contract fell US$2.14 to settle overnight at US$92.25 a barrel. It had jumped US$4.37, or 4.9 percent, on Wednesday to its highest close since Nov. 27 on unexpected declines in U.S. crude stockpiles.

Prices fell more than US$2 a barrel in the previous session, as investors sold futures contracts on expectations of an ongoing price slide.

After a gain of almost 5 percent on Wednesday, two causes of the midweek surge in oil prices evaporated Thursday when the U.S. dollar strengthened and Exxon Mobil Corp. said a Texas refinery suffered no production outages from a fire.

In London, January Brent crude added 78 cents to US$92.90 a barrel on the ICE Futures exchange.

Some analysts said fresh buying by large funds also was helping push prices higher.

"It seems that a large amount of the buying was fresh buying, and it looks like it may have come from large traders who got out before Thanksgiving - and who may have decided to get long before any New Year rush to buy for 2008," said Peter Beutel, president of the U.S. energy risk management firm Cameron Hanover. "It suggests that prices may now want to make another run at US$100 (a barrel) and possibly beyond."

Crude supplies fell 700,000 barrels during the week ended Dec. 7, according to a weekly inventory report from the U.S. Energy Department's Energy Information Administration. Analysts surveyed by Dow Jones Newswires had expected a 100,000 barrel increase.

Total oil and product inventories have fallen for several straight weeks, which is normal for this time of year, but remain high by historical standards, according to the EIA.

An increase in oil supplies at the closely watched Nymex delivery terminal in Cushing, Oklahoma, however, has pushed the price of January crude below the price of February crude. It's the first time since August the price of a front-month contract has fallen below a contract for later delivery.

That price relationship is seen as an indication that oil supplies are rising and prices will fall. In electronic trade Friday, February crude rose 31 cents to US$92.77 a barrel Friday.

A firming of the dollar Thursday neutralized another reason many analysts have cited for oil's run last month to above US$99 a barrel.

Oil futures offer a hedge against a weak dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.

Heating oil futures added 3.70 cents to US$2.6517 a gallon (3.8 liters) while gasoline prices rose 1.56 cents to US$2.3900 a gallon.

Natural gas futures fell 1.8 cents to US$7.175 per 1,000 cubic feet.