LONDON – Oil prices brushed within 60 cents of a new record over $55 a barrel on Tuesday as cold weather boosted fuel demand in U.S. Northeast, the world's largest heating oil market.
Growing signals that OPEC (search) will not increase output at its meeting in Iran next week and weakness in the U.S. dollar also bolstered prices.
U.S. light crude rose 70 cents to $54.59 a barrel, the second highest settlement on record, after climbing within 60 cents of the contract's all-time high of $55.67. London's Brent crude rose 75 cents to $52.84 after hitting a new record $53.30 a barrel.
A wintry blast swept into the U.S. Northeast, sending temperatures into a nose-dive that is likely to keep furnaces blazing for several days. The chill helped push U.S. heating oil futures up 3.88 cents to $1.5238 a gallon.
"Cold weather is supporting and funds are back again and the all-commodities CRB index is skyrocketing on the weak dollar," said Tom Bentz, analyst at BNP Paribas Commodity Futures in New York.
The dollar fell to less than $1.33 against the euro, its weakest since early January, spurring speculative funds into energy and away from foreign exchange markets.
Several OPEC ministers, meanwhile, have said they see no need to raise output ahead of the group's meeting in the Iranian city of Isfahan next week.
Iran's Oil Minister Bijan Zanganeh was the latest to say the cartel had little room for maneuver to discuss production.
"The most OPEC can do in Isfahan is roll over production for a short period and to have another extraordinary meeting," Bijan Zanganeh told a news conference in Tehran on Tuesday.
Venezuela, Qatar and Algeria have all come out against raising output, and OPEC President Sheikh Ahmad al-Fahd al-Sabah of Kuwait said on Sunday that although prices were high, the market was well-supplied.
"Everybody realizes that at this level OPEC can't really do anything, they are still afraid that the market isn't really that tight," said Tony Nunan, a manager at Mitsubishi Corp. in Tokyo.
The group is usually reluctant to raise output ahead of the second quarter because the end of the Northern Hemisphere winter spells a slowdown in demand, while the summer driving season has yet to kick off.
Nigeria has called on other producers to help cut "excessive" prices. OPEC is already producing some 630,000 barrels per day (bpd) above its 27 million bpd limit, a Reuters survey showed.
Claims by some OPEC members that the market's supply-demand balance is healthy are likely to get backing from U.S. stock data Wednesday, which analysts expect will show stockpiles rising for the fourth consecutive week.
Crude and gasoline supplies in the United States are already running about 9 percent higher than last year, according to the most recent data.
But demand growth remains a concern.
The U.S. Energy Information Administration (search) on Tuesday raised its forecast for world oil demand for the second quarter, along with its demand forecasts for the U.S. and China.
"Upward revisions by the EIA's forecast on world oil demand and that Chinese oil demand would likely be strong again were supportive factors in today's trading," said Marshall Steeves, analyst at Refco Group.
Crude inventories are expected to show a 1.8-million-barrel increase when the U.S. Energy Information Administration releases weekly stock data at 10:30 am EST on Wednesday, according to a Reuters poll of 12 analysts.
U.S. gasoline stocks, which have risen sharply in the Gulf Coast over the past month while the other four regions of the country have remained in normal ranges, are expected to be unchanged.