London: Crude oil traded above $55 (Rs2,420) a barrel as the Organization of Petroleum Exporting Countries(OPEC) plans to trim output starting this week amid concern that Iran, the world’s fourth-largest producer, could instigate supply disruptions.
OPEC, producer of about 40% of the world’s crude, last month agreed to cut output by 500,000 barrels a day starting 1 February. The oil price also is supported by concern about Iran’s nuclear programme and involvement in West Asia unrest.
Crude oil for March delivery fell 5 cents to $55.37 a barrel in after-hours electronic trading on the New York Mercantile Exchange at 11:10am in London. The contract earlier gained as much as 54 cents or 1%. Brent crude oil for March settlement was down 6 cents to $55.23 a barrel on the ICE Futures exchange in London.
The OPEC reduction is “certainly constructive, because this is at the same time planned refinery maintenance is taking crude demand down in the US and Europe,” said Mike Wittner, head of energy market research at Credit Agricole SA’s Calyon unit in London. Saudi Arabia may “not mind lower prices as a way of throttling back on Iran’s influence.”
Oil prices rose last week as traders speculated that colder- than-normal weather in the US will increase demand for heating fuel. Temperatures in the Northeast, where 80% of the nation’s heating oil is consumed, may remain below average until 11 February, according to the National Weather Service.
“Energy prices are strong as winter finally makes its long overdue appearance,” Stephen Schork, president of the Schork Group Inc. of Villanova, Pennsylvania, said in a report. “Heating demand is expected to jump” this week, he said.
Heating oil for February delivery advanced 0.06 cents to $1.592 a gallon in New York, gaining for the fifth day in seven.
The price of US benchmark has fallen about 19% in the past 12 months because of a mild winter in the US and rising fuel supplies.