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Oil recovers lost ground on mild winter in the US

Oil prices recovered some lost ground on Friday after sinking beneath US$55 a barrel for the first time since 2005, owing to mild winter weather in the US.

Bargain-hunting set in after bearish investors pushed New York's benchmark contract to US$54.90 in electronic deals -- the lowest level since June 14, 2005.

Light sweet crude for delivery in February recovered US$0.72 in New York to close at US$56.31 a barrel.

In London, Brent North Sea crude for February delivery gained US$0.53 to settle at US$55.64.

Brent earlier touched US$54.50, which was last seen on Nov. 30, 2005.

"The bears had won the week. The market was oversold," Alaron Trading energy broker Phil Flynn said.

"There was a strong employment report, which might imply better demand in the US," he added.

US employers added a healthy 167,000 new jobs last month, the government said in a report on Friday that was much better than expected on Wall Street.

"And now we have some forecasters saying the weather might get a little colder, at least in the [US] midwest," Flynn said.

Unusually warm temperatures in the US have driven oil futures down about 9 percent since the start of the year.

"Expectations of a continuing mild US winter have sapped expected demand for heating fuel," Sucden analyst Michael Davies said earlier on Friday as prices were sliding.

Crude prices have tumbled since the start of the New Year as the unseasonably warm weather has curbed demand for heating oil in the northeast US, the world's most energy-hungry region.

The slump has extended from the end of last year despite efforts by OPEC to cut production to support prices.

The Department of Energy revealed on Thursday that US stockpiles of distillates, which include heating fuel, jumped by two million barrels to 135.6 million barrels in the week ending Dec. 29.

That reading was much more than the rise of 850,000 barrels predicted by analysts.

The Department of Energy added on Thursday that crude inventories dropped 1.3 million barrels to 319.7 million last week -- which was less than the anticipated 2-million-barrel decline.
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