Oil prices dip on forecasts of warmer U.S. weather

Crude oil prices dipped Friday on forecasts for warmer weather in the U.S. northeast, the world's largest heating oil market.

Photo: Oil prices dip on forecasts of warmer U.S. weather

The market also appeared to be reacting to news that OPEC output had dropped but was still above agreed cutbacks.

Light, sweet crude for March delivery dropped 19 cents to US$57.80 (EUR44.04) a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange. The contract on Thursday lost a penny to settle at US$57.99 (Ђ44.19) a barrel.

Brent crude was down 42 cents on London's ICE futures exchange.

The U.S. National Oceanic and Atmospheric Administration said it expects above-normal temperatures next week to end a spate of freezing weather in the U.S. Northeast, which accounts for 80 percent of the nation's heating oil demand. But the bitter cold of recent weeks hasn't resulted in as sharp a drawdown of heating oil stockpiles as market analysts expected.

Oil prices tumbled more than US$1 (EUR0.76) on Wednesday after the Energy Information Administration reported that distillate fuel stocks which include diesel fuel and heating oil fell by 3 million barrels last week. Analysts had expected a bigger pull of 4.3 million barrels. Commenting on the trend, Vienna's PVM Oil Associates further downward price pressures, noting that "milder temperatures are now expected to arrive in the U.S. Northeast by the end of next week."

Traders were also digesting news from the Organization of Petroleum Exporting Countries that said crude output from its 10 quota-bound members fell 112,000 barrels a day in January to 26.759 million barrels a day.

The decline was broadly in line with recent industry surveys and left the 10 members overshooting their production target by 459,000 barrels a day.

OPEC oil exports in the four weeks ending March 3 are seen falling 160,000 barrels per day from a month ago, according to a report by U.K.-based tanker-tracking consultants Oil Movements.

Market participants shrugged off news of a fire at a Canadian refinery on Thursday.

Imperial Oil Ltd.'s refinery in Nanticoke, Ontario, was operating at a reduced rate Thursday afternoon following a morning fire in a crude processing unit, said Pius Rolheiser, a company spokesman. He added the 112,000 barrel-a-day refinery does not anticipate problems meeting its commitments to customers.

Heating oil futures fell marginally to US$1.621 a gallon (3.8 liters) while natural gas prices added 3.6 cents to US$7.32 per 1,000 cubic feet.