Oil prices paused below $60 in early Tuesday trading, but analysts expected fresh upward assaults as an extended chill in the US Northeast fires demand in the world's biggest heating oil market.
US crude was down 12 cents or 0.2 percent at $59.79, having briefly hit $60.80 in New York on Monday, its highest level since November 4.
Prices are up about $4 over the past week as the delayed onslaught of winter finally bites. "We're now seeing the long-awaited cold snap and even some snow storms in the United States," said Gerard Burg, minerals and energy economist at the National Australia Bank in Melbourne.
"The greater pressure on heating oil should now flow through to crude and give some direction, which we've lacked over the past couple of months." Temperatures on Tuesday are expected to be between 6 and 12 degrees Fahrenheit below average in the US Northeast, driving up demand for heating oil and potentially eroding stockpiles, which stand up 12 percent on 2004 after a late start to winter.
Analysts forecast that weekly inventory data from the US Energy Information Administration (EIA) due on Wednesday would show a 1.1 million barrels drawdown in crude stocks for the week to December 2.
But in a preliminary Reuters survey, they also expected that distillate stocks, including heating oil, could rise by 1.6 million barrels and gasoline stocks by 1.2 million barrels in the period before temperatures dropped.
"There is a bit of a time-lag in all this, but a prolonged cool spell should see a real impact on heating oil stocks which until now have been robust," said National Australia Bank's Burg.
Heating oil eased 0.57 cents to $1.7839 a gallon in trading, while gasoline shed 0.88 cents to $1.5810.
Analysts said the market should remain focussed on weather conditions until the Organisation of Petroleum Exporting Countries meets in Kuwait on December 12 to discuss output policy.
The price rally of the past few days has been capped as key Opec ministers suggested they are happy with current market prices and that they see little need to reduce supplies. Elsewhere, Venezuela said it had repaired two oil pipelines carrying 400,000 barrels per day to its largest refinery complex after they were damaged in a blast that officials branded sabotage, ahead of parliamentary elections in which the allies of President Hugo Chives recorded a huge victory.
And Iraq's Oil Minister Abraham Bahr al-Alum told Reuters that the country plans to boost its crude oil production to pre-war levels of 2.6 million barrels per day in 2006, although he did not explain how.