US demand will fuel oil price

REPORTS of a seasonal surge in demand for heating oil in the US and signs that non-Opec members are edging towards agreement on production cuts looked likely to push oil prices sharply higher today.

Demand for heating oil doubled as stocks in the US fell by 4% last week, their largest weekly fall since early in the year, as dealers bought 1.65m barrels a day, up from a year low the previous week. The surge sent the US price for a barrel of light crude for January delivery up 40 cents to $19.55 before it came back to $19.40.

London bookmakers were calling the price of a barrel of benchmark Brent for January about 30 cents higher from last night's close of $18.75, up from a 29-month low on Monday of $16.65.

Oil prices were already on the march, adding 4% on Tuesday as Norway and Mexico signalled that they might reach a deal with Russia to cut non-Opec production. A flood of Russian oil on to a market weakened by economic downturn has brought prices down, reviving concerns among the Opec cartel that crude prices could fall to less than $10 barrel.

Opec last week agreed to cut its output by 1.5m barrels a day on condition that independent producers follow suit to the tune of 500,000 barrels to shore up prices.