Oil falls to near $81 in Europe as traders eye warmer weather, weaker crude demand

Oil falls to near $81 on reports of warmer weather

Oil prices fell to near $81 a barrel Tuesday on expectations a frigid cold spell in parts of the U.S., Europe and Asia will ease in coming weeks, weakening crude demand.

By early afternoon in Europe, benchmark crude for February delivery was down $1.16 cents to $81.36 a barrel in electronic trading on the New York Mercantile Exchange.

On Monday, a weakening U.S. dollar helped push the contract to a 15-month high near $84 a barrel before it settled down 23 cents at $82.52.

Crude prices have jumped from $69 a barrel a month ago as cold winter weather, especially in the U.S. Northeast, boosted demand for oil products such as heating oil. Forecasters now expect those freezing temperatures to rise the rest of this month.

“The bullish impetus off of the dollar weakness was largely offset by warmer Northeast temperature expectations for the next couple of weeks,” Galena, Illinois-based Ritterbusch and Associates said in a report.

The focus on weather patterns seemed to indicate that the basic market forces of supply and demand could be increasing their effect on prices, which have been much more exposed to external factors lately.

“It was both interesting and satisfying to see weather trump last year’s trump cards of a weaker dollar and stronger equities,” said a report from U.S. energy consultancy Cameron Hanover. “It is premature to proclaim a return to a more fundamental market, but it was nice to see.”

Oil prices were also under pressure Tuesday from a stronger dollar, which makes oil more expensive for investors holding currencies losing ground to the greenback.

In midday European trading, the euro was down to $1.4475 from $1.4519 late Monday in New York.

In other Nymex trading in February contracts, heating oil fell 1.72 cents to $2.1629 a gallon and gasoline slipped 0.87 cent to $2.1340 a gallon. Natural gas futures lost 4.1 cents to $5.413 per 1,000 cubic feet.

In London, Brent crude for February delivery fell $1.14 to $79.83 a barrel on the ICE Futures exchange.

Associated Press writer Alex Kennedy in Singapore contributed to this report.