Near-record oil prices rose on Monday as natural gas futures rallied on forecasts for cool US weather. US distillate stocks are stubbornly below year-ago levels on trucking and heating demand, making oil prices vulnerable to natural gas rallies late in the Northern Hemisphere winter. "Certainly natural gas markets were the star performer of the day, which has helped pull heating oil off lows," said Tim Evans, analyst at IFR Energy Services in New York. Natural gas futures rose more than 36 cents to above $7.13 per million British thermal units.
Temperatures in New York and Chicago were expected to remain several degrees below normal this week, according to AccuWeather.
Oil prices had eased earlier in the day after top Opec producer Saudi Arabia proposed to raise the cartel's output ceiling by half a million barrels per day to stem soaring global energy costs.
US light crude CLc1> rose 52 cents to $54.95 a barrel, after touching a high of $55.05. The price last week peaked at $55.65, just two cents below October's all-time record of $55.67. In London, Brent oil futures rose 56 cents to $53.65 a barrel.
Saudi Arabia's Oil Minister Ali Naimi said the Organisation of the Petroleum Exporting Countries should boost its output ceiling of 27 million bpd at its meeting in Iran on Wednesday.
"Saudi Arabia is of the opinion that Opec's production ceiling should be adjusted upward by 500,000 bpd during the forthcoming ministerial meeting," Naimi said in a statement.
Saudi Arabia expected to raise oil output again later in the year to meet global demand growth, Naimi said.
The proposal is the first indication of what Saudi Arabia, Opec's biggest producer, wants to happen at the Iran meeting.
"It has come as a bit of surprise that they've come out to say this now," said Helen Henton, head of commodities research at Standard Chartered Bank.
"But it's not a bad thing if you look at demand growth forecasts for the year. They need stocks to grow in the second and third quarters. If that happens, then we may see a correction in prices to the mid-$40's," she said.
Opec President and Kuwaiti Oil Minister Sheikh Amad al-Fahd al-Sabah also said on Wednesday he could not rule out an output increase at the group's meeting.
But some members such as Iran, Qatar, Venezuela, Algeria and Indonesia have said they want to keep production steady.
"We have enough oil in the market," Iranian Oil Minister Bijan Zanganeh told reporters in Isfahan.
Opec production hit a 25-year high in September last year at more than 30 million bpd as the group pumped close to full capacity to stem record crude prices.
A Reuters survey for February output showed Opec's 10 members excluding Iraq pumping 600,000 bpd above the formal 27 million bpd limit.
The market also drew support from a report that China will use its foreign exchange reserves to buy oil for the country's planned strategic reserve.
The International Energy Agency (IEA) warned on Friday that global demand was growing faster than expected this year, bolstered by the late cold snap in the northern hemisphere and robust growth in the United States and China.
The Paris-based IEA revised up its demand growth forecast for 2005 by 290,000 bpd to 1.81 million bpd to take annual world consumption to 84.3 million bpd.
SINGAPORE: Oil prices held steady on Monday, firmly planted above $54 a barrel despite signals from Opec exporters that they may informally increase supplies in an effort to quell this year's scorching rally.
US light crude tip-toed one cent higher to $54.44 a barrel.