Oil futures surged 5 percent on Friday to reach their highest level this month as colder weather sent shivers through the spines of investors who had been anticipating lower prices.
Light, sweet crude for January delivery climbed US$2.10 to settle at US$46.28 per barrel on the New York Mercantile Exchange, capping a 14 percent rise in the past week.
While oil is about US$9 a barrel cheaper than it was in late October, the downward momentum hit a wall of resistance this week as fresh government data and a rush of cold weather in the eastern US reinforced concerns about the country's tight supply of heating oil.
Heating oil futures charged US$0.0583 higher on Friday to US$1.4395 per gallon (3.79 liters), or roughly US$0.23 higher than a week ago.
The week long run-up in energy futures has been magnified by investors previously betting that the drop in prices in early December would continue, said James Cordier, president of Liberty Trading Group in St. Petersburg, Florida. "People who had been bearish are covering short" amid colder weather and rising fuel demand, Cordier said.
In London, Brent crude was up US$1.96 at US$43.39 a barrel on the International Petroleum Exchange.
While price volatility may be good for speculators and momentum traders, some brokers said it is bad for small companies looking to hedge their fuel purchases.
"It's sort of approaching ridiculous that we have these huge moves every day," said Aaron Kildow, a broker with Prudential Financial Inc in New York.
Other concerns on traders' minds included fears of supply disruptions in Russia and Nigeria and the potential effect of a 1 million barrel a day production cut by OPEC that goes into effect next month.
Crude futures spiked more than 5 percent on Wednesday after the US Department of Energy reported an unexpected drop in commercially available supplies of crude oil and heating oil.
The nation's supply of distillate fuel, which includes heating oil and diesel, is 12 percent below year-ago levels and traders say it will be difficult for refiners to replenish inventories as demand naturally rises during winter.
Colder weather appeared to be rolling in for the weekend.
"There will be two or three storms and plenty of cold air," forecaster Accuweather said on its Web site. "The first storm will bring snow to a portion of the Northeast Monday."
Traders also were keeping an eye on Russia, and beleaguered oil giant Yukos' efforts to stave off the government-ordered sale today of its main Yuganskneftegaz subsidiary. The company successfully sought an order from a bankruptcy judge in Houston, Texas, to block the sale. The temporary injunction, issued late Thursday, doesn't apply to the Russian government but does apply to banks financing the bidders.