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Oil prices dip as fears ease over frigid weather in US

Oil futures dipped below $46 a barrel yesterday as traders assessed what appeared to be a short-lived cold snap in the United States, where cold weather and tight heating oil supplies helped drive prices higher last week.

Light, sweet crude for January delivery dropped 64 cents to $45.64 per barrel on the New York Mercantile Exchange. On London's International Petroleum Exchange, February Brent crude fell 94 cents to $42.45 per barrel.

Analysts also were watching events in the Middle East, where a recent purported message by Al Qaeda leader Osama bin Laden urged militants to strike Saudi Arabian oil facilities. They also monitored the forced sale of Russian oil giant Yukos's main subsidiary.

Oil futures had surged 5 percent Friday to reach their highest level this month as colder weather spread across the eastern United States. By yesterday, forecasts through the end of the year were not calling for as much frigid air, leading traders to take a less bullish stance.

While oil is still roughly $10 a barrel cheaper than in late October, concerns about the country's tight supply of heating oil last week stalled the downward momentum.

Commercially available supplies of distillate fuel, which include heating oil, are 12 percent below year-ago levels, and the US Department of Energy has warned heating oil customers they would have to pay some 30 percent more this winter.

Heating oil was down 4.45 cents yesterday at $1.395 per gallon, natural gas futures tumbled 50.5 cents to $6.952 per 1,000 cubic feet, and gasoline futures declined by 3.79 cents to $1.1522 per gallon.

In Cairo this month, the Organization of Petroleum Exporting Countries agreed to cut production back to target production levels of 27 million barrels a day early next year -- a move that would take about 1 million barrels a day off the market.

"Cooler weather has compounded the impact of their pledged cutbacks, reversing the recent slide in oil prices," Energy Intelligence, which reports on the industry, said in a recent commentary on its website.

"There are still danger signals further down the road," it said. "OPEC'S economists are warning of a weaker global economy in 2005 and much slower oil demand growth."

Energy markets have been jittery all year over potential production disruptions in Nigeria, Russia, Venezuela, Saudi Arabia, and Iraq.

In Russia, a previously unknown company won the forced auction for Yukos's Yuganskneftegaz unit, a target in the government's bid to claim $28 billion in back taxes from Yukos.

Yukos pumps a fifth of Russian oil and had attempted to ward off the sale, saying it could affect supply.

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