Originally created 12/29/04

Crude futures remain below $42 a barrel



Crude futures rebounded slightly Tuesday, following a 6 percent drop the day before on forecasts calling for warmer weather in the U.S., which eased worries about tight supplies of winter fuel.

Benchmark light, sweet crude for February delivery climbed 45 cents to $41.77 per barrel on the New York Mercantile Exchange, making up some ground after prices plunged $2.86 per barrel on Monday.

"A little bounce is not unexpected," said Andrew Lebow, senior vice president at Man Financial Inc. in New York. "But I think the mentality is still bearish."

Oil markets have been extremely volatile in recent months amid strong global demand and a tight supply cushion. Traders have been focused lately on the weather, potential supply disruptions and the U.S. government's weekly petroleum supply reports.

The Energy Department's next petroleum supply report is scheduled to be released Wednesday.

The U.S. supply of distillate fuel, which includes heating oil and diesel, remains 12 percent below year ago levels.

Heating oil futures climbed 1.13 cent to $1.2221 per gallon on Nymex, where gasoline futures rose less than a penny to $1.0457 and natural gas futures gained 5.3 cents to $6.213 per 1,000 cubic feet.

Oil prices are nearly 25 percent below the late October high above $55 a barrel, though they remain nearly 30 percent higher than a year ago. The average retail price of gasoline in the United States is $1.791 per gallon, or 31.3 cents higher than a year ago.

That said, analysts see room for prices to fall further.

"If winter weather doesn't set in, there will be a lot of downward pressure on the market," said Esa Ramasamy, oil editorial manager for energy reporting agency Platts in Singapore.

Forecasts show warmer weather in the key U.S. Northeast later this week and next week.

Meanwhile, the deadly earthquake and resulting tidal waves that struck various parts of Asia on Sunday, killing more than 50,000 people, has had minimal impact on the crude markets.

The quake hit locations where there is little crude or natural gas production, although recovery efforts in the affected areas might lead to a marginally higher demand for supplies.

"Recovery processes require heavy equipment and machinery and the demand for petroleum stocks will probably go up," said Ramasamy.

London's International Petroleum Exchange, which trades the Brent crude contract, remained closed Tuesday. It will reopen Wednesday.

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AP Business Writer Brad Foss in Washington contributed to this report. Yeo Ghim Lay reported from Singapore.