Oil and heating oil prices got a boost Tuesday as the second powerful storm in four days threatened to dump more than a foot (0.3 meters) of snow on the East Coast. A weakening dollar was also a factor. Crude oil prices moved higher for the second straight day, in part because of the weather. Benchmark crude for March delivery jumped $1.86 to settle at $73.75 a barrel. In London, Brent crude gained $2.02 to settle at $72.13 on the ICE futures exchange.
Traders often buy commodities such as oil as a hedge against inflation and a weaker dollar and sell them when the U.S. currency rises. Oil, which is priced in dollars, become less expensive in other currencies when the greenback weakens. The euro bought $1.3775 in late New York trading, up from $1.3671 late Monday.
The storm was expected to drop about as much snow in parts of the Midwest before making its way to the big heating-oil consuming states in the Mid-Atlantic and New York by Tuesday afternoon and evening. As much as 20 inches (50 centimeters) of snow are expected in Washington, 18 inches (45 centimeters) for Philadelphia and maybe a foot (30 centimeters) or more in New York City. Parts of the Mid-Atlantic region were buried with nearly three feet (1 meter) of snow over the weekend.
Coupled with forecasts for colder-than-normal temperatures through at least mid-February, demand for heating oil will continue to be as strong as it has been for much of the winter. Wholesale heating oil prices rose 5.18 cents to settle at $1.9373 per gallon on the New York Mercantile Exchange Tuesday. Eventually, that jump in prices could result in higher retail prices as people in the Northeast, who consume 80 percent of the heating oil used in the U.S., likely will need to fill up their tanks one more time before spring arrives.
Still, some analysts were surprised that prices did not move even higher.
«Given the strong weather, implied demand and lack of refining capacity, you would think heating oil would be stronger at this point," oil analyst and trader Stephen Schork said. U.S. refiners have been cutting production along the East Coast for months because of continued soft demand for energy. The national average for retail heating oil prices was $2.867 per gallon last week, nearly 50 cents higher than a year ago, according to the Energy Information Administration. But heating oil's influence on energy markets has been waning for years.
The number of U.S. homes heated with oil has dropped to 7 percent in 2008 from 32 percent in 1960. Consumption of heating oil for residential customers is about half of what it was 20 years ago, according to EIA records. More Americans are switching to natural gas, but even there prices have remained steady despite heavy demand. Natural gas prices fell 4.5 cents per 1,000 cubic feet to $5.356 on the Nymex.
