High Demand, Cold Push Oil to Near $55

SINGAPORE -- Oil prices rose toward $55 per barrel on Wednesday, within $1 of an all-time high, as a late cold snap in the United States reignited demand and a weaker dollar lured more speculators back to energy markets.

U.S. light crude for prompt-month April delivery traded up 10 cents to $54.69, less than a dollar below record highs of $55.67 hit in October last year. May and June delivery crude touched contract highs above that level on Tuesday.

Britain's Brent crude, which soared to a record $53.30 on Tuesday, was trading flat at $52.84.

"It is cold weather and a weak dollar that is encouraging market participants to push up the price," said Tetsu Emori, chief strategist at Mitsui Bussan Futures in Tokyo. "We have to look at the currency markets rather than the oil fundamentals."

A blast of wintry weather is expected to last into the weekend, bolstering U.S. heating oil demand as it pushes temperatures well below normal across the country's Northeast and Midwest, said private forecasters Meteorlogix.

The late burst of demand may strain inventories of heating oil that are running 8 percent below last year, dealers fear.

U.S. distillate stockpiles, which include heating oil, were expected to have fallen 1.3 million barrels in the week to March 4 due to cold weather last week, the seventh decline in a row, a survey of analysts found.

But crude oil stocks were expected to rise for the fourth straight week, climbing 1.8 million barrels and keeping a healthy surplus compared to this time in 2004. Gasoline inventories, running at their highest since 1999, were seen unchanged.

A U.S. government inventory report was due Wednesday.

In Japan, gasoline stocks have eased from a five-year high last week, but were 11.7 percent bigger than a year earlier, industry data showed.

Hefty crude stocks have helped convince many members of OPEC that they should elect at next week's meeting in Iran to keep production steady, despite prices soaring 21 percent over the last month.

Indonesia is the latest to come out against an output rise.

"We will agree [with] OPEC to roll over the current quota. ... This rollover is to respond to the current high price," said the country's OPEC governor, Maizar Rahman.

Iran, Venezuela, Qatar and Algeria have also lined up against pumping more crude, and OPEC president Sheikh Ahmad al-Fahd al-Sabah has said the market is well-supplied at the moment.

The dollar's retreat to a two-month low against the euro and the British pound on Tuesday helped spur further gains, with speculators betting on better returns in oil markets, where robust demand growth is expected to tighten supplies later in the year.

Demand seems to be running faster than anticipated this year, while non-OPEC production has disappointed.