NEW YORK – Oil prices settled at their highest level in more than two months on Monday as snowy weather in the United States spurred expectations for strong heating oil demand.
Light, sweet crude for April delivery gained 25 cents to settle at $61.39 a barrel on the New York Mercantile Exchange, after earlier rising as high as $61.75. The settlement was the highest since the front-month contract closed above $62 on Dec. 22.
A winter storm dumped as much as two feet of snow in the Midwest, grounding hundreds of airline flights and closing major highways. The National Weather Service also reported that more than a foot of snow blanketed parts of the Northeast, the country's largest heating oil market.
Several analysts are forecasting a decline in stockpiles of heating oil when the government issues its weekly inventory report on Wednesday, said Jason Schenker, an economist with Wachovia Corp. However, Schenker said he expects the drop to be much smaller compared with the prior week.
U.S. inventory figures released last Thursday showed a larger-than-expected decline in distillates, which include heating oil and diesel, as well as a drop in gasoline inventories.
April Brent crude on London's ICE Futures exchange added 45 cents to finish at $61.33 a barrel.
Nymex heating oil prices rose by roughly a half cent to settle at $1.7562 a gallon while natural gas futures dropped 20.8 cents to $7.547 per 1,000 cubic feet. April gasoline futures rose by 1.56 cents to end at $1.8337 a gallon.
The market was also supported by tensions between Western powers and Iran over its nuclear program, as well as escalating violence over the weekend in Nigeria's oil producing-region.
In London on Monday, the five permanent members of the U.N. Security Council and Germany met to discuss tightening trade restrictions with Iran, which has flouted a U.N. deadline to stop enrichment of uranium.
"Enough uncompromising rhetoric is now taking place at a high enough levels to seem to make it untenable to maintain any position that Iran is not going to be a major issue this year," said Kevin Norrish, commodities research analyst with Barclays Capital, in a note.
Iranian President Mahmoud Ahmadinejad said Sunday his country's disputed nuclear program was irreversible. Iran, OPEC's No. 2 supplier, also said it successfully tested a rocket that went into space.
In Nigeria on Friday, gunmen in the country's increasingly lawless oil-producing region killed one Lebanese man and, in a separate incident, militants kidnapped two Italians.
Shokri Ghanem, the head of Libya's oil industry, said Monday that he sees U.S. oil prices remaining close to $60 a barrel for the rest of 2007.
"The price will hover around $60 per barrel, maybe moving up or down slightly, for the rest of the year," Dow Jones Newswires quoted him as saying from his office in Tripoli.
Qatari Oil Minister Abdullah bin Hamad al-Attiyah was quoted Monday as saying that if prices stay where they are today — near $60 a barrel — OPEC may keep its current output policy in place when the organization meets March 15, according to Dow Jones Newswires.
The Organization of Petroleum Exporting Countries agreed last November to gradually rein in production by 1.7 million barrels per day, but only an estimated two-thirds of the cuts have been achieved, according to Dow Jones.