High-flying oil prices hold firm

High-flying oil prices held firm yesterday as a blizzard enveloping the US north-east strained tight heating oil stocks.

US light crude stood seven cents higher at $48.60 a barrel, building on Friday's $1.22 rally. London Brent crude eased two cents to $45.71 a barrel after touching its highest level since November 30th in early trade.

Crude prices have threatened to breach the $50 level faced with threats to Iraqi oil flows ahead of Sunday's elections and speculation that OPEC's ministerial meeting the same day could yield an output cut.

"The organisation's decision, and the rumours that leak out before it is officially announced, could be a key factor in determining if prices do finally break over $50 or continue trading in the upper $40s," analysts at Washington-based PFC energy said in a market comment.

Prices have climbed as blizzards blanketed large parts of the US north-east, the biggest regional heating oil market in the world, pulling temperatures well below the seasonal average, driving homeowners to fire up their furnaces.

The temperature in the US north-east is expected to remain well below normal for the rest of the week, but the outlook for the following week is warmer, forecasters Meteorlogix said.

Traders worry that the freeze may drain heating fuel stockpiles that remain below year-ago levels, despite an unusually warm first half of the northern hemisphere winter.

Oil dealers fear that sabotage on Iraq's oil infrastructure may escalate in the days leading up to or following the January 30th election.

Any additional disruption to Iraqi exports would add to pressure on global supply, which is still grappling with outages of nearly 500,000 barrels per day from Nigeria, Norway's North Sea, the US Gulf of Mexico and Canada.