Oil prices rebound after recent plunge amid warm winter in U.S. Northeast

Monday, January 8th 2007, 6:18 am

By: News On 6

SINGAPORE(AP) _ Oil prices rose in Asian trading Monday, rebounding from last week's plunge amid a warmer-than-normal winter in the U.S. Northeast, a key region for heating oil demand.

Light, sweet crude for February delivery rose 27 cents to $56.58 a barrel in electronic trading on the New York Mercantile Exchange mid-afternoon in Singapore. The contract rose 72 cents Friday to settle at $56.31 a barrel _ still a drop of nearly 8 percent for the week, the biggest one-week drop since April 2005.

Brent crude for February delivery rose 43 cents to $56.07 a barrel on the ICE Futures exchange in London.

``Because of a steep drop last week, the market is due for a rebound, and that's what we're seeing this morning,'' said Victor Shum, an analyst with Purvin & Gertz in Singapore.

Over the weekend, the U.S. National Weather Service reported record or near-record temperatures across the Northeast. Temperatures in New York City's Central Park hit 72 degrees, tying January's all-time high.

Much of that region has seen no snow this winter. The U.S. National Oceanic and Atmospheric Administration projected a December, January and February about 2 percent warmer in the Northeast than the 30-year average.

``The U.S. Northeast weather will remain a focal point but the winter season isn't over yet and some weather forecasters expect a cold front coming.There's a chance the cold weather will return and raise heating oil demand,'' Shum said.

``The sharp drop (last week) was an overreaction,'' he added.

Shum said the plunge in the price of crude oil would test the Organization of Petroleum Exporting Countries' resolve to cut production. The oil cartel agreed to a 1.2 million barrel-a-day cut in crude output beginning in November and another 500,000 barrel-a-day cut set to begin Feb. 1.

U.S. crude oil prices stayed below OPEC's unofficial target level of $60 a barrel for a third day Friday and the chairman of Libya's oil company, Shokri Ghanem, told Dow Jones Newswires Friday that OPEC ministers were waiting to see whether the lower price trend continues before taking any further action.

``OPEC almost has to do something here, and that is something we need to be ready for,'' said Peter Beutel at Cameron Hanover.

Longer-term, the market's fundamentals appeared firm, analysts said.

``With all the current bearish exuberance, we remind ourselves that Chinese demand, the overall (growth in the) economy, and the various geopolitical situations are hardly gone and should not be forgotten,'' said John Kilduff, senior vice-president for energy risk management at Fimat USA.

In other trading, heating oil futures rose 1.42 cents to $1.58 a gallon while natural gas prices gained 17.5 cents to $6.359 per 1,000 cubic feet.