Feb. 23 (Bloomberg) -- Crude oil traded above $51 a barrel in New York, close to its highest price in almost four months, as colder-than-normal weather in the U.S. and Europe raised demand.

U.S. heating-fuel use will be 4 percent higher than normal this week, said Weather Derivatives of Belton, Missouri. Temperatures in Germany, France and the rest of Northwest Europe will be 3 to 8 degrees Fahrenheit below normal, according to Lexington, Massachusetts-based Meteorlogix LLC. Oil also rose on speculation that a falling dollar would boost global fuel use.

``What boosted prices was the weaker dollar and colder weather forecast for the U.S. Northeast that people had written off last week,'' said James Cordier, president of Liberty Trading Group, a St. Petersburg, Florida, futures broker. ``Oil trading over $50 a barrel gets consumers very nervous all over the globe.''

Crude oil for April delivery traded at $51.17, down 25 cents, or 0.5 percent, at 7.18 a.m. Singapore time in after-hours electronic trading on the New York Mercantile Exchange. Futures are up 49 percent from a year ago.

The March contract, which expired yesterday, rose $2.80 cents, or 5.8 percent, to $51.15 a barrel on the New York Mercantile Exchange, the highest closing price since Oct. 29 and biggest one-day gain since June 1.

Oil has climbed 26 percent from a four-month closing low of $40.71 a barrel on Dec. 10 amid stronger-than-expected demand and concern that falling prices would prompt OPEC to cut production. Prices rose to a record $55.67 on Oct. 25.

U.S. stocks fell yesterday as oil prices climbed above $51 a barrel, sending the Dow Jones Industrial Average and the Standard & Poor's 500 Index to their steepest losses since August.

`No Excess Capacity'

Analysts in a Dec. 20 Bloomberg survey said oil would average $43 a barrel this quarter, according to the median of 24 estimates, and $39 in 2005 amid slowing demand and increased production from Russia and OPEC. Oil in New York has averaged $47.13 a barrel so far this quarter.

``There's no excess capacity to ease any potential supply disruptions,'' said Rick Mueller, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts. ``Chinese demand is growing faster then was forecast and oil producers such as Iraq are not stable.''

The International Energy Agency, which represents oil- consuming countries, has raised its demand forecasts in all but three months since November 2003. Oil demand in China, the world's second-largest oil consumer after the U.S., grew 16 percent in 2004 and is projected to rise 6.3 percent this year, the agency said on Feb. 10.

``It's all about demand,'' said said Chris Mennis, owner of New Wave Energy, an oil trader in Aptos, California. ``Industrial giants like India, Japan and China are just competing for a scarce commodity. The market's going higher. I think we will see $60 this year.''

Heating Oil

Heating oil for March delivery rose 9.09 cents, or 6.7 percent, to $1.4402 a gallon in New York, the highest close since Nov. 29. Heating oil, which is 62 percent higher than a year ago, traded at $1.4305 a gallon at 6.21 a.m. Singapore time.

Countries in Northwest Europe ``are being hit by cold winds moving in from Scandinavia and Russia,'' said Joel Burgio, a meteorologist at Meteorlogix.

Normal lows in Northwest Europe at this time of year range from 30 degrees Fahrenheit (-1 Celsius) in Hamburg to 36 degrees Fahrenheit (2 Celsius) in London, Burgio said.

In the U.S. Northeast, the region responsible for 80 percent of the nation's residential heating-oil consumption, temperatures will be 8 to 12 degrees below normal from Feb. 24 through Feb. 26, Burgio said.

The average low temperature in New York at this time of year is 30 degrees Fahrenheit and in Boston it is 26 degrees, according to Meteorlogix.

Weaker Dollar

The dollar fell the most in more than four months against the yen and dropped versus the euro, the Korean won and at least 30 other currencies after the Bank of Korea said it plans to seek higher returns for its reserves by raising its holdings of non- dollar currencies.

``The falling dollar is the linchpin of the widespread rise in all commodities,'' said Jim Steel, director of commodity research at Refco Inc. in New York. ``A falling dollar increases demand for dollar-denominated commodities such as oil because the real cost is falling for other countries.''

Oil-producing countries sell oil in dollars and often buy goods in euros and yen. The OPEC benchmark went for $43.12 a barrel on Feb. 21.

South Korea's central bank, which has a total of $200 billion in reserves, said in a Feb. 18 report to a parliamentary committee it will increase investments in assets denominated in currencies such as the Australian and Canadian dollars. The country's reserves are the world's fourth biggest, behind Japan, China and Taiwan, according to data compiled by Bloomberg.

To contact the reporter on this story: Sri Jegarajah in Singapore at sjegarajah@bloomberg.net; Mark Shenk in New York at mshenk1@bloomberg.net.

Last Updated: February 22, 2005 18:45 EST