Oil stays below $61 on warm US, but eyes on Iran

Reuters: Oil prices held below $61 a barrel on Wednesday as mild weather conditions were projected to persist in the United States, slowing down heating oil demand. SINGAPORE (Reuters) – Oil prices held below $61 a barrel on Wednesday as mild weather conditions were projected to persist in the United States, slowing down heating oil demand.

U.S. light crude traded at $60.90 a barrel by 0420 GMT in thin Globex electronic trading, down 15 cents from Friday’s close.

The contract lost 20 cents to $60.85 a barrel at the end of electronic trade on Tuesday, but no closing price was set as the NYMEX floor closed in honor of late U.S. President Gerald Ford.

London Brent crude prices was up 24 cents at $60.68 in thin activity, after it settled 42 cents lower at $60.44 on Tuesday.

DTN Meteorlogix forecast the temperatures in the U.S. Northeast, the world’s top heating oil market, would be as high as 16 degrees Fahrenheit (8 Celsius) above normal this week, with many other weather forecasters seeing warmer-than-average temperatures until next week.

The National Weather Service said on Tuesday that demand for heating oil in the week to January 6 will be about 33 percent below normal.

U.S. oil prices on Friday settled 2006 at $61.05 a barrel, 1 cent higher than the final day of trading in 2005. NYMEX has fallen more than $17 since its record of $78.40 in July, and averaged $66.24 in 2006.

Analysts expect prices to stabilize this year unlike in the last two years when Hurricane Katrina hit U.S. oil production in September, 2005, helping to lift prices to record highs at that time. Prices were supported further in mid-2006 when U.S. refiners built up stocks ahead of the hurricane seasons, which turned out to be milder last year.

Militant attacks on Nigerian oilfields and geopolitical issues, including disputes over Iranian and North Korean nuclear programs, also helped push up prices.

“In the next year or the year to 18 months we could see some softening, not necessarily below current levels. We don’t necessarily expect higher prices partly because so much non-OPEC supplies are coming on,” said Jeff Brown, analyst at FACTS in Singapore.

“We see it at around this level going forth next 18 months.”

The soft oil prices found some support from Iran’s refusal to comply with a U.N. resolution to stop its uranium enrichment program. President Mahmoud Ahmadinejad said the resolution imposing trade sanctions on Iran was “invalid.”

Iran’s oil minister last week said the world’s fourth-largest crude producer would use any weapon, including oil exports, to defend itself.