Oil prices settle above US$55 a barrel

Oil prices rose more than $1 to settle above US$55 a barrel Friday on concerns that producers were complying with OPEC's production cuts and on expectations of continued blustery weather in the northeastern United States. Light, sweet crude for March delivery on the New York Mercantile Exchange rose $1.19 to settle at $55.42 a barrel. In a volatile week of trading, oil prices have climbed nearly 6.6 per cent after dipping below $50 a barrel last week.

On the ICE Futures exchange in London, Brent crude settled at 55.29 a barrel, up $1.17.

Tank tracker Lloyds Marine Intelligence Unit said Friday that oil exports from the Organization of Petroleum Exporting Countries fell to less than 23 million barrels a day in December from just under 24 million barrels a day in November, according to a Dow Jones newswire report. Saudi Arabia, the world's largest crude oil producer and exporter, was the quickest to implement OPEC's production cuts; its exports in December were 1.1 million barrels a day lower than before the OPEC's October call for production cuts.

"The market has been concerned about the rate of OPEC compliance. Yesterday, it was worried compliance was bad. Today, it's worried that it's good," said Tim Evans, an energy analyst at Citigroup Global Markets. "Overall, the larger story is that OPEC production is declining."

OPEC said it would begin cutting production by 1.2 million barrels a day in November, but some traders speculated that cartel members were not complying. The cartel said late last year it planned to cut production an additional 500,000 barrels a day starting Feb. 1. On Thursday, tanker tracker Oil Movements said it expects exports from OPEC to rise in mid-February. The news sent oil prices down to settle at $54.23 Thursday, after rising as high as $55.90 during earlier trading.

"The market has overcome that tracker report," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. "The market is thinking that OPEC compliance will be better as we go forward. Oil is looking very strong."

Victor Shum, energy analyst with Purvin & Gertz in Singapore, also pointed out that prices are being propped up by cold weather in the U.S. and the announcement Tuesday that the U.S. government plans to double the size of its Strategic Petroleum Reserve.

"If you look at trading this week, the market has found some support above the $50-a-barrel price mark. It appears to have found a floor due to a number of factors," Shum said.

Earlier this month, crude fell to $50 a barrel, but it rose about 10 per cent over the past week as cold weather gripped the northeastern United States, a major consumer of heating oil. Another blast of Arctic air hit the northeastern U.S. on Friday. The 11-15 day forecast for the Midwest and Northeast predicts temperatures dipping well below normal, Evans said.

Natural gas settled at $7.175 per 1,000 cubic feet, up 27 cents, after plunging more than 51 cents on Thursday. Evans said prices are under some pressure because the February natural gas options contract expires Friday and the futures contract expires Monday.