Crude oil shivers around $82/barrel

Recent frigid weather has boosted oil prices
West Texas Intermediate (WTI) crude oil prices are averaging around $82/barrel so far this month, up from $74 in December "on nothing more than cold weather jitters," according to MF Global analyst Edward Meier.

The band of frigid weather has blanketed the eastern two-thirds of the country with record-low temperatures and blistering winds across the country, including many states not used to such temperatures. However, the midwinter cold snap hasn't boosted petroleum demand as much as expected and some forecasters now say price inflation may fade. "Markets are in a somewhat muddled state right now," writes Meier in a note to clients, "as the breakout thought to be brewing above $82 seems to have fizzled."

Futures on the New York Mercantile Exchange are projecting a WTI average of $81.83/bbl for all of 2010, which is $3 more than the U.S. Energy Information Administration (EIA) forecast of $79.83. Commentary by Meier suggests these are somewhat inflated and due to slide, "considering the bearish slant to recent EIA numbers."

Interestingly, crude oil prices around $80/barrel "are satisfactory," and the OPEC (organization of Petroleum Exporting Countries) cartel is unlikely to raise its oil output targets unless prices reach $100, Shukri Ghanem, chairman of Libya's National Oil Corporation, tells Reuters.

EIA data shows crude inventories rising by 3.7 million barrels last week, surpassing earlier forecasts calling for a 1.2-million-barrel increase. Distillates rose by 1.4 million barrels versus estimates calling for a 1.8-million-barrel drawdown. And, similar to the latest American Petroleum Institute numbers, the biggest surprise was in gasoline, where inventories rose by 3.8 million barrels, more than triple what was expected. Heating oil stockpiles, however, dropped by 1.1 million barrels on account of the colder weather.

Rounding out the rest of the numbers, refinery utilization rose by a sharp 1.4% on the week and imports also pushed higher, increasing by 540,000 barrels to a total of 8.9 million barrels per day. Meanwhile, total product demand was off by 0.9%, while gasoline demand was up 0.4%. Distillates lagged once again, with offtake down by 0.9% from last year.