Energy prices boosted by chilly weather

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Oil prices headed for a strong finish to the year following the latest US weekly inventories data, while white sugar prices extended their record-breaking run amid concerns over potential supply shortages.

In energy markets, Nymex February West Texas Intermediate reached $79.49 a barrel before slipping slightly to trade 41 cents higher at $79.28 a barrel. ICE February Brent added 39 cents at $78.03 a barrel after hitting a session high of $78.34.

Further evidence of an improvement in US demand helped push oil prices higher. US crude stocks fell 1.5m barrels last week, whereas the consensus forecast was for a decline of 2m barrels. Crude imports rose unexpectedly, up 320,000 barrels a day last week to 8m b/d.

Refinery utilisation increased 0.3 percentage points to 80.3 per cent, as expected.

Cold weather provided a boost to heating oil demand. Distillate stocks (including heating oil) fell 2m barrels last week, slightly below the consensus forecast for a drop of 2.2m barrels. Nymex January heating oil traded 0.4 cents, or 0.2 per cent, higher at $2.1076 a gallon.

The January heating oil contract will expire at the close on new year’s eve and the February contract, the new benchmark from next week, also traded 0.6 cents, or 0.3 per cent, higher at $2.1222 a gallon.

Holiday-related travel boosted demand for petrol with consumption above the key 9m barrels a day mark, averaging 9.02m b/d over the past four weeks, up 1.1 per cent compared with the same period a year ago. Petrol stocks fell 300,000 barrels last week, confounding consensus forecasts for an increase of 500,000 barrels.

Nymex January RBOB unleaded gasoline added 1.6 cents, or 0.8 per cent, at $2.0270 a gallon.

The January gasoline contract will also expire at the close on new year’s eve and the February contract, the new benchmark next week, traded 1.7 cents, or 0.9 per cent, higher at $2.0469 a gallon.

Traders said the January heating oil and gasoline contracts could be choppy moving towards Thursday’s expiry. Liquidity in both has shifted into the February contract which already has significantly more open interest (active positions) than the expiring January contract.

Crude oil prices have moved into “overbought” territory, according to Olivier Jakob, head of Petromatrix, the Swiss-based energy consultancy. But Mr Jakob said the timing of any price correction was difficult to assess as pension funds were likely to increase their portfolio allocations to commodities at the start of 2010.

White sugar prices extended their record breaking run, trading above $700 a tonne for a second session. Liffe March white sugar rose 1.1 per cent to a high of $708 a tonne.

Amid concerns that the market will face acute supply shortages early next year, raw sugar prices looked to build a hold above the 27 cents mark with ICE March raw sugar up 2 per cent at 27.30 cents a pound.

Copper hit a fresh 15-month high at $7,375 a tonne before easing back to $7,330, a gain of 0.8 per cent as strikes threatened production in Chile.

Gold was fractionally weaker at $1,095 a troy ounce.

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