Oil Rises Above $80 for First Time Since November on Cold Snap

Jan. 4 (Bloomberg) -- Crude oil rose for an eighth day, trading above $80 a barrel for the first time in seven weeks, as freezing weather and improving economic prospects around the world boosted the outlook for fuel demand.

U.S. heating oil inventories may be further strained, after six weekly declines, by record-low temperatures across the country’s northeast. Russian oil supplies to Europe were threatened after a deadline passed in talks with Belarus on export duties. In Iran, holder of the second-largest crude reserves, a crackdown on opposition protests last week was the harshest in six months.

“Most important has been the cold weather,” said Christopher Bellew, senior broker with Bache Commodities Ltd. in London. “There has also been the re-emergence of political risk in Iran and strength across commodities generally. But if there’s any sign of a thaw we’ll see prices drop.”

Crude oil for February delivery rose as much as $1.99, or 2.5 percent, to $81.35 a barrel in electronic trading on the New York Mercantile Exchange. That’s the highest since Oct. 26, and the first time above $80 since Nov. 18. The contract was at $81.24 at 1:53 p.m. London time. Heating oil climbed to the highest in 14 months.

The heaviest snowfall to hit Beijing and Seoul in more than half a century grounded hundreds of planes in the two capitals as temperatures in northern China were set to fall to the lowest in 50 years.

Cold Weather in U.S.

The Climate Prediction Center, a National Weather Service agency, forecast below-normal temperatures across the eastern half of the U.S. from tomorrow through Jan. 13. The northeast region consumes about four-fifths of the nation’s heating oil.

U.S. heating oil stockpiles have fallen for six weeks to 44.4 million barrels, the longest decline since April 2008, Energy Department data showed Dec. 30.

Heating oil for February delivery rose as much as 5.41 cents, or 2.6 percent, to $2.1729 a gallon in New York. It was at $2.1653 at 1:39 p.m. London time.

Crude oil shipments to Europe from Russia were normal as supply talks with Belarus continued beyond a Jan. 1 deadline, according to Belarus’s state-run oil company Belneftekhim. Russia, the world’s largest energy exporter, is still in discussions with its western neighbor, according to Russian energy ministry spokeswoman Irina Yesipova.

PKN Orlen SA, Poland’s largest refiner, is receiving Russian oil as normal through the pipeline that runs through Belarus, according to spokesman Dawid Piekarz.

‘Playing Hardball’

Russia’s Deputy Prime Minister Igor Sechin said Dec. 28 Moscow would charge duties starting Jan. 1 if no agreement was reached by then. The countries are negotiating a deal that would exempt some of Russia’s oil sales to Belarus from export duty.

The Financial Times reported yesterday on its Web site that Russian oil shipments were halted, citing traders it didn’t identify by name.

“Russia is playing hardball with Belarus,” said Olivier Jakob, managing director of Petromatic GmbH in Zug, Switzerland. “But while temperatures in the Atlantic Basin are below normal, stock layers are above normal. We do not think that the fundamental picture will allow for crude oil prices to be sustained.”

U.S. payrolls probably fell by 1,000 workers last month, the smallest drop since the recession began two years ago, according to a Bloomberg News survey of economists before a Jan. 8 Labor Department report. A stabilizing labor market may boost consumer spending, the biggest part of the U.S. economy.

China Manufacturing

“There are further indications that the recovery is progressing,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “It’s also been pretty cold in the U.S. and that’s also been supportive.”

China’s manufacturing expanded in December by the most in five years, HSBC Holdings Plc and Markit Economics said in an e- mail today, supporting estimates that the country’s growth has accelerated to more than 10 percent. The country is the world’s second-largest energy consumer.

In Iran, police said last week they detained more than 300 people after clashes between security forces and protesters in Tehran and other cities left more than eight people dead.

Brent crude oil for February settlement rose as much as $1.90, or 2.4 percent, to $79.83 a barrel on the London-based ICE Futures Europe exchange. It was at $79.77 at 1:53 p.m. London time.

To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg.net;

To contact the editor responsible for this story: Stephen Voss on sev@bloomberg.net