Oil prices rose toward $55 a barrel today, 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.
US light crude for prompt-month April delivery traded up 24 cents at $54.83, 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 yesterday.
Britain's Brent crude which soared to a record $53.30 yesterday, was trading down 4 cents at $52.80.
"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 US 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 per cent below last year, dealers fear.
US 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 Reuters survey of analysts found.
But crude oil stocks were expected to rise for the fourth straight week, climbing 1.8 million barrels and maintaining a healthy surplus versus this time in 2004. Gasoline inventories, running at their highest since 1999, were seen unchanged.
The US government inventory report is due at 1530 GMT.