Crude Oil Rises to Two-Week High on Heating Oil Supply Concern

Nov. 22 (Bloomberg) -- Crude oil rose to a two-week high on concern that heating oil supplies may be insufficient as the winter heating season approaches in North America and Europe.

U.S. stockpiles of distillate fuel, a category that includes heating oil, plunged 11 percent in the nine weeks ending Nov. 12, according to the U.S. Energy Department. The National Weather Service forecast lower-than-normal temperatures in most of the U.S. from Nov. 27 through Dec. 1. An explosion on an oil pipeline in Iraq also lifted prices.

"We'll be focused on the inventory reports this week because it is do or die time for heating oil inventories," said Carl Larry, an associate director of energy futures at Barclays Capital Inc. in New York. It may be too late in the year for any gain in inventories, as winter heating needs are about to rise, he said. "Cold weather will start to hit supplies."

Crude oil for January delivery rose 21 cents, or 0.4 percent, to $49.10 a barrel at 10:42 a.m. on the New York Mercantile Exchange. Prices touched $49.55, the highest since Nov. 8. Oil has declined 12 percent from the record of $55.67 on Oct. 25. Futures are up 55 percent in the past year.

Crude oil in New York surged 4.8 percent on Nov. 19 when the first cold spell of the season hit Germany, Europe's biggest consumer of heating oil.

In London, the January Brent crude-oil futures contract rose 19 cents, or 0.4 percent, to $45.08 a barrel on the International Petroleum Exchange. Brent futures touched $51.95 on Oct. 27, the highest since the contract began in 1988.

Global Growth

Oil futures have declined from their all-time high on signs that global economic growth will slow, which would also cut demand for petroleum products.

The International Monetary Fund today said global growth will cool to 4 percent next year compared with a Sept. 29 forecast of 4.3 percent. The IMF predicted the world economy will grow 5 percent this year, the highest rate in almost three decades, in its World Economic Outlook in September.

An oil pipeline exploded in southern Iraq and crews were assessing whether the country's exports of 1.7 million barrels a day from its main terminal will be disrupted, the head of Iraq's South Oil Co. said. The explosion may reduce shipments from southern Iraq, where more than 80 percent of the nation's exports originate.

Engineers "are investigating the problem, which is due to corrosion, not terrorism," Jabbar Al-Leaby said in a telephone interview from Basra. "We hope the problem won't stop exports."

Iraqi Output

Exports from northern Iraq have been repeatedly disrupted by attacks since the U.S.-led invasion last year. Iraq pumped 2.25 million barrels a day in October, according to a Bloomberg survey. Iraq pumped 2.48 million barrels a day in February 2003, before the U.S.-led invasion.

Iraqi production peaked at 3.7 million barrels a day in December 1979, according to the U.S. Energy Department. The Iran- Iraq War that lasted from 1980 until 1988, the Persian Gulf War of 1990 and the United Nations Sanctions that followed Iraq's invasion of Kuwait have left Iraq's oil infrastructure in poor repair.

Heating oil for December delivery fell 0.16 cent, or 0.1 percent, to $1.481 a gallon in New York. Prices touched $1.498, the highest since Oct. 28. Heating oil surged 8.7 percent last week.