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U.S. crude futures jump ahead of peak winter demand

Published 22/12/2015, 11:52 am
© Reuters.  U.S. crude futures jump ahead of peak winter demand
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* Mild weather seen keeping prices close to 2009 lows

* Start of winter has seen 30 pct less heating days than usual

* Outlook to Jan. 4 is for 23 pct less heating days than usual

By Henning Gloystein

SINGAPORE, Dec 22 (Reuters) - U.S. crude futures jumped away from 2009 lows in early Asian trading on Tuesday as the peak winter month took over as the prompt delivery contract, but milder weather than usual was capping heating demand and the price outlook for early 2016.

U.S. West Texas Intermediate (WTI) crude futures CLc1 were trading at 35.88 per barrel at 0829 GMT, up from 2009 lows of $33.98 a barrel hit the previous session.

Despite the bounce, which is seen as typical as contracts roll over for expiry on Dec. 20 2016 and amid the peak winter demand, analysts said unusually mild weather would drag on prices.

Oil analysts at BNP Paribas (PA:BNPP) said that the amount of U.S. heating degree days had been 30 percent below the 10-year average since Dec. 7 and that days requiring heating were expected to remain 23 percent below normal until Jan. 4.

"In the next two weeks as a whole, the U.S., Europe and Russia will be particularly milder than normal," the bank said.

An unusually mild start to the winter has dominated the northern hemisphere, caused in part by the El Nino weather phenomenon, keeping heating oil demand lower than the norm. urn:newsml:reuters.com:*:nL3N0Z51NL

This weak demand pattern is seen clashing with an expected rise in supplies once Iran's oil exports start to fully return after a lifting of western sanctions against Tehran.

Bank of America Merrill Lynch (N:BAC) said Iranian output could go up by 600,000 barrels per day, from a current volume of around 1 million barrels per day, over a period of six months once sanctions are lifted.

The International Energy Agency said this week that it expected Iran's exports to rise by half a million barrels per day within 6-12 months of sanctions being lifted. urn:newsml:reuters.com:*:nL3N14A3CS

Iran's barrels would add to an already oversupplied market that has seen prices fall by two-thirds since mid-2014, undercutting lows seen during the 2008 financial crisis and pulling oil to levels last seen more than a decade ago.

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