NEW YORK – Oil ended a slide on Monday, firming up as cold weather in the U.S. Northeast promised higher fuel demand and sabotage in Iraq once again disrupted the country's exports.
U.S. light crude (search) was up 19 cents at $40.90 a barrel, after earlier falling to $40.25, the lowest price since the end of July. London's Brent crude was up 37 cents at $37.75 a barrel .
Temperatures in the U.S. Northeast, the world's largest heating oil market, were expected to be below normal for the next five days, ending a streak of mild weather that had helped fuel producers increase winter stockpiles.
U.S. heating oil prices were up 2.73 cents to $1.2530 a gallon on the forecasts.
While stockpiles of heating oil have been slowly rising, they remain about 13.5 percent below the year-ago level, prompting concern in oil markets that supplies may be insufficient if the U.S. winter is particularly cold.
In Iraq, sabotage stopped the flow of oil through the country's northern export pipeline to the Turkish terminal of Ceyhan on Sunday.
The pipeline had just been restarted after a 12-day outage, continuing a stretch of sporadic flows since an explosion damaged the pipeline in early November.
Oil has been under pressure from the view that world crude stocks will be sufficient this winter, despite OPEC's (search) decision Friday to rein in 1 million barrels a day of excess output.
Saudi Arabia is earmarked to cut 500,000 bpd. Refiners in Japan and South Korea, Asia's second and fourth biggest oil consumers, respectively, said on Monday Riyadh had informed them that supplies would be chopped by 8 percent in January.
Saudi sales to global oil companies also were reduced significantly, but traders said their companies requested lower supplies rather than having cuts imposed by Riyadh.
"The point is the Saudis aren't imposing this cut. Customers are asking for less because the demand is not there," said Nauman Barakat of brokers Refco.
"We're drowning in heavy, sour crude from OPEC, so that a 200,000- to 300,000-barrel-a-day cut from the Saudis is no big deal," he said.
Oil prices have fallen from $50 at the end of November, helped along by a move by hedge funds into short positions on the New York crude contract, a bet on falling prices.
Data from the U.S. Commodity Futures Trading Commission (search) showed on Friday crude speculators switched to 17,440 net short positions in the week to Dec. 3, from 5,815 net longs in the previous week.
It was the largest net short position for the funds for 14 months on the U.S. crude contract.
Analysts said crude already produced and in transit will continue to bolster supplies for weeks to come, before the cuts take effect.
"It (the market) is now waiting for the barrels to hit," said Deborah White, senior economist at SG commodities. "There is nothing that OPEC can do about that. We expect some stock builds this week, if not on crude then on distillates."