NEW YORK – Oil prices neared $59 a barrel Tuesday as the approach of a possible storm in the Northeast boosted expectations for increased heating oil demand over the next few weeks.
Crude futures saw a second day of gains after sliding to five-month lows last week, Prices are about 20 percent above year-ago levels. A barrel of light, sweet crude for January delivery added $1.14 to settle at $58.84 on the New York Mercantile Exchange.
Other Nymex prices also advanced, with heating oil rising 2.7 cents to $1.736 per gallon, natural gas up 28.3 cents at $11.614 per 1,000 cubic feet and gasoline adding 3 cents to finish at $1.49 per gallon.
January Brent on London's ICE Futures exchange rose $1.07 to $56.41 a barrel.
Oil prices have been dictated recently by weather in the northeastern United States, which consumes about three-quarters of the country's heating oil and is the world's biggest market for the distillate. Forecasts for a snowstorm during the busy Thanksgiving weekend sparked the rally.
AccuWeather had predicted the storm's arrival for later this week, but forecasters now say the cold front will bring a mix of rain and snow stretching from North Carolina to Maine beginning Tuesday. Up to a foot of snow is expected in parts of Vermont and New Hampshire, according to AccuWeather meteorologist Brian Lovern.
Limited refining capacity following hurricanes Katrina and Rita stoked worries about supply shortages this winter, and many analysts remain mixed on whether the nation's inventories are sufficient for an expected spike in demand. On Wednesday, the Energy Information Agency releases weekly data on petroleum inventories.
But tame temperatures so far this season have allowed reserves to build, one analyst said. Reports of growing supplies and falling demand last week pulled crude oil futures below $56 a barrel for the first time since June.
"We're starting the season in pretty good shape for heating oil and natural gas," said Sheraz Mian, senior oil analyst for Zack's Investment Research. "We had quite high temperatures at the start of the heating season. That has helped build inventory levels."
Mian — who estimates that annual crude demand may taper slightly this year but will return to normal growth in 2006 — said the main variables for energy prices will be how low temperatures fall this winter and whether record prices have stunted economic growth.
Regardless, some believe prices have bottomed out for the year as the winter cold starts to blanket the United States.
"With another blast of cold weather headed to us this week, we may have seen the lows," said Phil Flynn, an analyst with Alaron Trading Corp. in Chicago.
Analysts' projections for U.S. supplies were scattered. PVM Oil Associates of Vienna, Austria, estimated that U.S. heating oil demand would jump by about 7 percent above normal levels in key consuming regions this week.
Meanwhile, a survey by Dow Jones Newswires was mixed, with five analysts predicting crude stocks increases and four saying there would be a fall. Distillate stocks, which include heating oil, jet fuel and diesel, are likely to rise, the analysts said.
The London-based Center for Global Energy Studies warned of low distillate stocks in the United States after production was halted by the hurricanes — when refineries normally begin boosting output before winter.
"Distillate output has suffered most from the refinery shutdowns, falling by 600,000 barrels per day from peak summer levels," CGES said. "Imports have only made small inroads upon this supply gap. ... Stocks are now close to the bottom of the seasonal range."