Oil up for sixth day on stock draw, cold weather

By @ibtimes on

Oil rose on Wednesday for a sixth day as a mix of cold weather and declining U.S. crude and fuel inventories lifted prices to near $80, all but ensuring this year's gain will be the best in a decade for crude.

After falling to a five-year low under $33 a barrel at the start of the year, oil prices staged a steady comeback, on track for their best gains since 1999 on a combination of OPEC supply cuts, a quick rebound in emerging market demand and the resurrection of a popular dollar/oil spread trade.

U.S. crude for February delivery rose 41 cents, or 0.52 percent, to settle at $79.28 a barrel, briefly touching a five-week high of $79.80 but failing to top the psychological $80 level. Prices have risen for nine of the last 11 sessions, gaining 14 percent in just over two weeks.

London Brent crude rose 39 cents to settle at $78.03.

The lack of volume is exaggerating some of the moves. The bulls may want to try and test $80 and see if there is any traction, said Gene McGillian, analyst at Tradition Energy.

Data from the U.S. Energy Information Administration showed crude oil stockpiles across the world's top energy consumer fell by 1.5 million barrels in the week to December 25, just shy of a forecast 2 million-barrel drawdown.

Although most of that draw came in the isolated West Coast market, with Gulf Coast and East Coast inventories showing builds, prices were also helped by a 2 million-barrel decline in distillate stocks as cold weather hit the U.S. Northeast, the world's largest heating oil market.

Temperatures were expected to remain unseasonably cold for the next 48 hours, according to forecaster Meteorlogix.

Oil's gains came in spite of a stronger dollar as the inversely correlated trade that had gained favor as an inflation hedge this year broke down in the face of oil-related geopolitical concerns and improving demand prospects.

The dollar gained across the board on Wednesday, hitting its highest since late September against the Japanese yen as it benefited from year-end flows in thin trade and from the view the U.S. economy is on the road to recovery.

Concerns about a potential supply impact due to political developments in OPEC member country Iran have also supported prices this week.

Tens of thousands of government supporters rallied in cities across the country on Wednesday, swearing allegiance to the clerical establishment and accusing opposition leaders of causing unrest in the Islamic state.

(Reporting by Jonathan Leff, Matthew Robinson and Robert Gibbons in New York, Emma Farge in London and Judy Hua in Singapore; editing by Jim Marshall)

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