SINGAPORE – Oil rose to near $59 a barrel Tuesday as bitter cold continued to blast the United States, bolstering demand for heating fuels in the world's biggest energy consumer.
U.S. crude oil settled 14 cents higher at $58.88 a barrel after racing up to a one-month high of $59.99 in earlier activity. London Brent crude gained 32 cents to $58.42.
The onset of cold weather in the U.S. Northeast, the single largest heating oil market, and a shift in investment flows has lifted oil from a 20-month low of $49.90 set Jan. 18.
"The markets continue to be influenced by the onset of the coldest sustained temperatures of the year in the United States, which most forecasters say will hold for another 10 days," Addison Armstrong, an analyst at TFS Energy, wrote in a research note.
U.S. forecasters expect temperatures to remain below normal for the next six to 10 days. The National Weather Service said heating demand in the United States was expected to be about 20 percent above normal.
In the past when oil reached current price levels, consumer nations led by the United States called on the Organization of the Petroleum Exporting Countries to increase oil supplies to protect economic growth. Oil struck a record over $78 a barrel in July on supply concerns from key producers.
"At the margins ($60 oil) is bad for the economy, higher prices are not a good thing. I guess we weren't down at $50 long enough for many people to have adjusted to a world where oil prices are permanently at $50," said Tony Dolphin, director of economics and strategy at Henderson Global Investors.
Cold weather has also arrived in Europe, with Britain's Met Office expecting cold snaps to last into March.
But with oil stocks still relatively high, some analysts said the late-winter burst of demand was unlikely to provide impetus for a convincing break above resistance at $60.
"The surge in heating demand will not significantly lift oil prices since the winter is almost over," said Tetsu Emori, chief strategist at Mitsui Bussan Futures.
Barclays Capital technical analyst MacNeill Curry, who studies charts of past price movements to predict future direction, said crude prices were at a "make or break" stage.
"The ... rally we expected is potentially nearing completion," he wrote. If prices climbed above $61, however, there was scope for further gains towards $65.
Closely watched weekly U.S. oil stocks data is due for release Wednesday.
A Reuters poll of analysts points to a 3.2 million-barrel drop in distillate stocks, including heating oil, and an eighth consecutive build in gasoline stocks.
Crude oil stocks were expected to have risen by 1.4 million barrels, a preliminary Reuters poll shows.