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Fears of prolonged US cold snap drive oil prices up further

Oil prices extended their gains on Friday as traders feared supplies may be squeezed in the wake of forecasts predicting a prolonged cold snap in key areas of the US.

New York's main contract, light sweet crude for delivery in January climbed US$0.85 to close at US$0.59.32 per barrel. In London, the price of Brent North Sea crude for January delivery added US$0.90 to US$0.57.05 in closing trade.

Bill O'Grady at AG Edwards said crude oil following natural gas prices higher amid predictions of increased heating demands in many US regions.

"It's fears the cold weather will lead a supply problem," he said. "We've seen the recovery from the hurricanes virtually ceased at this point ... Now the concern is as the weather turns colder that they will be supply constraints and that's driving prices significantly higher," O'Grady said.

Mike Fitzpatrick at Fimat USA said a number of factors are pushing up prices, and that is bringing speculators back into the market that drives the market even higher.

"Bullish comments from OPEC and predictions of colder weather this weekend, seemed to reignite the speculative winter buying interest," he said.

Also pressuring the market is a strong set of economic numbers that suggests energy demands will be higher, he said.

OPEC called on oil consuming countries to be flexible on fuel taxes in order to keep prices under control, Kuwait Oil Minister and OPEC president Sheikh Ahmad Fahd al-Sabah said on Friday.
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