“We do have higher confidence in a change by mid-February, but not to milder weather,” Leon Brown, a meteorologist at The Weather Channel in Britain, told Reuters. “February will probably remain a cold month right to the end.”

The cold and heavy snowfall has killed hundreds of people across Europe. The temperature in some eastern countries has plummeted to nearly minus 40 degrees Celsius.

More than 130 villages remained without electricity in Bulgaria on Wednesday and the army was delivering food and medicines, the Defence Ministry said.

Bulgaria declared Wednesday a day of mourning for eight people who died after melting snow caused a dam to burst, flooding an entire village. Two people are missing.

The European Union’s crisis response chief Kristalina Georgieva said the worst of the flooding was yet to come.

In Bosnia, authorities reported five more deaths from the cold and snow on Wednesday, taking the total to 13.

In Serbia, where 13 people have died and 70,000 are cut off by snow, authorities urged people to remove icicles from roofs after a woman in Belgrade was killed by falling ice.

An energy official in Serbia said while demand for electricity had soared, ice was hampering production in some hydro-power plants and coal trains were struggling to run.

A Croatian radio station said high winds had deposited fish from the Adriatic sea onto the island of Pag. “Instead of going fishing or to the market, people are taking their shopping bags and collecting fish on the shore,” Zadar radio reported.

NO EARLY THAW

Cold polar air from northern Russia flanking an area of high pressure has prevented warmer weather from moving in across the Atlantic over Europe, plunging a wide swathe of the continent into sub-zero temperatures for much of the past 10 days.

Officials from the World Meteorological Organization (WMO), speaking in Geneva this week, did not rule out the possibility of cold temperatures lasting for the rest of February.

Omar Baddour, who coordinates the WMO’s climate data monitoring programme, said there was a chance the pressure system might start lifting next week, but said it could remain until the end of the month.

A difference in pressure between Europe and the Arctic known as a “negative Arctic oscillation”, part of the cause of the freezing weather, is expected to take two or three weeks to return to equilibrium, Baddour said, meaning there may be no early thaw.

While the phenomenon of the high-pressure system itself is not unusual, the dramatic turn to below-normal temperatures after weeks of mild weather took experts by surprise.

“It’s actually quite unique and a bit baffling how this winter has developed,” Brown said. “It’s unusual for it to develop so suddenly and have it become a persistent block toward the end of January and February.”

The cold spell is the strongest one to happen in the month of February in 26 years, said Georg Mueller, a forecaster at Point Carbon, a Thomson Reuters company.

“It was in 1986 when we had the last similarly severe cold weather (in February),” Mueller said.

The sheer size of the current Siberian blocking pattern has made it difficult to predict how it will move, Brown said.

“In this instance this big blocking of cold air … seemed to influence the way the winds behaved rather than the other way around,” he said. “We didn’t expect the cold block to become so persistent and then move westward.”

Computer models are having trouble making forecasts for when the system will clear out of Europe, Brown said.

The cold snap has driven British gas prices up to their highest levels since 2006, hitting above 100 pence per therm on Tuesday, a surge of more than 15 percent.

Russia curtailed gas exports to Europe last week as demand reached all-time highs, forcing countries like Italy to increase imports from Algeria and extract stored gas.

Protracted cold temperatures and increased domestic demand could force Russia to cut its exports to Europe again.

Reuters

Futures dropped as much as 1.5 percent before a deadline for Greece to accept terms demanded by international lenders on a bailout package. Brent oil in London traded at the biggest premium to the American benchmark grade in 12 weeks as record- low temperatures in Europe bolstered fuel demand.

“There’s disappointment in the market because there’s been no resolution of the Greek crisis,” said Phil Flynn, an analyst at PFGBest in Chicago. “Cold temperatures in Europe along with concerns about Iran and other trouble spots are helping keep Brent strong.”

Crude oil for March delivery fell 55 cents, or 0.6 percent, to $97.29 a barrel at 10:57 a.m. on the New York Mercantile Exchange. Prices are down 1.6 percent this year.

Brent oil for March settlement gained 60 cents, or 0.5 percent, to $115.18 a barrel on the ICE Futures Europe exchange.

The Brent contract traded at as much as a $17.99 premium to West Texas Intermediate oil, the grade traded in New York, the widest spread since Nov. 9. Brent’s premium narrowed to $6.82 in intraday trading on Jan. 3 from a record of $27.88 on Oct. 14.

Greek Prime Minister Lucas Papademos struck a tentative deal with party leaders to extend spending cuts after euro-area finance chiefs told them an increase in the 130 billion-euro ($170 billion) aid package wasn’t forthcoming.

Chinese Growth

The economic expansion in China, the world’s biggest energy-consuming country, could be cut almost in half this year if Europe’s debt crisis worsens, the International Monetary Fund said. Growth (CNGDPYOY) may drop by as much as 4 percentage points from the fund’s current projection, which is for 8.2 percent this year, according to report released today by the IMF’s China office in Beijing.

“With stagnant growth in Europe likely to be a permanent feature, prices seem a touch overbought and may either consolidate or retrace,” said Christopher Bellew, a senior broker at Jefferies Bache Ltd. in London, who predicts Brent may slide to $112.50 a barrel. “Looking out much further, a recovering U.S. economy, prospects for a soft landing in China and continuing Syrian insurrection will mean higher prices.”

Oil in New York climbed for the first time in six days on Feb. 3 after the U.S. jobless rate fell to the lowest level in three years. The Labor Department said the unemployment rate dropped to 8.3 percent in January, the least since February 2009. Nonfarm payrolls increased 243,000, the most since April.

‘Mildly Bearish’

“The Greek crisis is making people mildly bearish,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The U.S. economy is showing signs of strength. We will be on the outlook for signs of a rebound in demand, but there haven’t been any yet.”

U.S. fuel demand dropped 8.3 percent to 17.7 million barrels a day in the week ended Jan. 27, the lowest rate since 1999, an Energy Department report on Feb. 1 showed.

Hedge funds cut bullish bets on oil in New York by 1.4 percent in the week through Jan. 31, according to data from the Commodity Futures Trading Commission. Money managers increased net long positions on Brent crude by 171 contracts to 86,423 lots in the same period, data from ICE Futures Europe in London showed.

Bloomberg

Futures were little changed after earlier advancing as much as 0.7 percent and are up 2 percent this week. Iran called on Saudi Arabia to be “more wise and responsible” after the kingdom said it could make up for any supply loss resulting from a European ban on imports of Iranian crude. The World Bank cut its global growth forecast by the most in three years, saying a recession in the euro region may exacerbate a slowdown in emerging markets.

“The market is very supported by tension over Iran,” said Ken Hasegawa, a commodity-derivative sales manager at Newedge Group in Tokyo, who predicts New York crude will trade between $98 and $104 a barrel this month. “Still, we have a lot of uncertainty in Europe and this factor may subdue this market.”

Crude for February delivery was at $100.78 a barrel, up 7 cents, in electronic trading on the New York Mercantile Exchange at 4:43 p.m. Singapore time. The contract earlier rose as much as 72 cents. It closed at $100.71 yesterday, up $2.01 from Jan. 13. Floor trading was shut Jan. 16 for the Martin Luther King Jr. holiday and electronic trades were booked with yesterday’s transactions for settlement.

Brent Premium

Brent oil for March settlement on the London-based ICE Futures Europe exchange was up 10 cents at $111.63 a barrel. The European benchmark crude was at a $10.72 premium to New York contracts for the same month. The spread closed at $10.66 yesterday, the lowest gap in nine days. It was a record $27.88 on Oct. 14.

Saudi Arabia can “easily” boost crude production to as much as 11.8 million barrels a day to offset a shortfall from Iran, Oil Minister Ali al-Naimi said in an interview with CNN on Jan. 16. The kingdom has the capacity to produce 12.5 million barrels a day and pumps about 9.8 million, he said.

“If this comment is the official stance of Saudi Arabia we advise Saudi officials to be more wise and responsible in their approach,” Iranian Foreign Minister Ali Akbar Salehi said yesterday, according to the state-run Fars news agency.

European Union foreign ministers are scheduled to meet Jan. 23 to decide on proposed sanctions on Iran’s oil imports, in a bid to halt its nuclear program.

Strait of Hormuz

The Persian Gulf state, the second-largest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia, has threatened to block the Strait of Hormuz in retaliation. About 20 percent of the world’s oil flows through the waterway, which is 21 miles (34 kilometers) wide at its narrowest point, according to the U.S. Energy Department.

The U.S. asked South Korea to halve oil imports from Iran, the Dong-A Ilbo newspaper reported today, citing an unidentified government official. South Korea’s stance is to cut shipments by about 30 percent, according to the report. A U.S. delegation visits Japan today to push for sanctions support.

The global economy will grow 2.5 percent this year, down from a June estimate of 3.6 percent, according to the World Bank. Turmoil in Europe has the potential to trigger a financial crisis reminiscent of 2008, the Washington-based institution said.

Oil’s rally in New York may stall as stochastic oscillators on the daily and weekly charts remain above 70, signaling futures have advanced too quickly, according to data compiled by Bloomberg. Investors tend to sell contracts when prices are considered overbought.

Crude inventories in the U.S., the world’s largest oil consumer, probably increased 3 million barrels last week, based on the median estimate of nine analysts surveyed by Bloomberg News before an Energy Department report tomorrow. Stockpiles have climbed the past three weeks to 334.6 million.

The industry-funded American Petroleum Institute in Washington will release its own supply data today.

Bloomberg

Futures gained as much as 1.1 percent after borrowing costs for Spain and Italy fell at debt sales yesterday and European Central Bank President Mario Draghi said he saw signs of stabilization in the euro region. Oil also climbed after Nigerian labor unions said they will continue a strike that threatens crude exports from Africa’s top producer. Planned European Union sanctions on Iran may be postponed by six months to allow some countries to find alternative petroleum supplies, according to an EU official with knowledge of the talks.

“It’s a case of Iranian embargo versus a mildly risk-on attitude as a consequence of the so-far, so-good Italian and Spanish bond auction,” said Ric Spooner, a chief analyst at CMC Markets in Sydney. Nigeria “is certainly another aspect” that’s affecting the market, he said.

Crude for February delivery increased as much as $1.09 to $100.19 a barrel in electronic trading on the New York Mercantile Exchange. It was at $99.91 at 8:33 a.m. London time. The contract yesterday fell $1.77, or 1.8 percent, to $99.10, the lowest close since Dec. 30. Prices are down 1.4 percent this week, the biggest decline since the five days ended Dec. 16, and up 1.1 percent this year.

Brent oil for February settlement rose 92 cents to $112.18 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate futures was at $12.27, compared with a record $27.88 on Oct. 14.

‘Upside Skew’

The risk of higher oil prices in 2012 is “increasingly skewed to the upside,” according to Goldman Sachs Group Inc. Iranian crude embargoed by the European Union will be replaced by Saudi Arabian supplies while China will take the surplus, Jeffrey Currie, head of commodities research at the bank in London, said in a report today.

Crude shipments from OPEC will reach the highest level in almost a year amid rising exports from Libya, according to tanker-tracker Oil Movements. The Organization of Petroleum Exporting Countries will export 23.66 million barrels a day in the four weeks to Jan. 28, the most since Feb. 12, 2011, the Halifax, England-based researcher said yesterday in an e-mailed report. The figures exclude Angola and Ecuador.

Signs of Stabilization

The European Central Bank’s injection of cash into the financial system last month is lubricating credit markets and there are “tentative signs” of economic stabilization in the euro area, ECB President Mario Draghi said in Frankfurt yesterday. While “substantial downside risks” remain, he pointed to falling yields on Italian and Spanish debt.

Nigerian labor unions said yesterday they will continue a strike that threatens oil exports from Africa’s top producer because no agreement has been reached yet with President Goodluck Jonathan on restoring fuel subsidies. The unions plan to resume talks with the president tomorrow, Abdulwaheed Omar, president of the Nigeria Labour Congress, told reporters at a press conference in the capital Abuja.

The oil union Pengassan said it would begin shutting down oil output on Jan. 15 if there was no agreement with the government, while its counterpart Nupeng said it has withdrawn its workers from fields operated by companies such as Royal Dutch Shell Plc (RDSA) to back the strike.

Iran Threat

Oil in New York has traded above $100 a barrel every day this year amid Iranian threats to respond to sanctions by shutting the Strait of Hormuz, a transit route for a fifth of the world’s crude. It rose to $103.74, the highest intraday price in almost eight months, on Jan. 4 after the EU said foreign ministers intend to announce harsher sanctions on Iran’s energy and banking industries at their next meeting.

Phasing in the European embargo would satisfy the concerns of countries most dependent on Iranian oil, including Italy, Greece and Spain, the EU official said, declining to be identified because the talks are private. Those three nations accounted for 68.5 percent of EU imports from Iran in 2010, according to European Commission data.

Sanctions, which would need to be agreed on by the foreign ministers of the 27-nation bloc on Jan. 23, are also likely to include an exemption for Italy so crude can be sold to pay off debts to Rome-based Eni SpA (ENI), the nation’s largest oil company, according to the official.

Oil may fall next week on concern that the U.S. economy is slowing, curbing fuel demand in the largest crude-consuming country, a Bloomberg News survey showed.

Fifteen of 30 analysts, or 50 percent, forecast oil will decline through Jan. 20. Ten respondents, or 33 percent, predicted prices will increase and five estimated there will be little change. Last week, 47 percent of surveyed analysts expected a decrease.

Bloomberg

Futures climbed as much as 1 percent as Germany’s chancellor prepared to meet the International Monetary Fund’s managing director today in Berlin. The Organization of Petroleum Exporting Countries can’t get involved in a dispute between the U.S. and Iran over sanctions, according to Venezuela’s oil minister Rafael Ramirez.

“The Iranian situation is really for speculators and traders to have a bit of fun,” said Gavin Wendt, founder and senior resource analyst at Mine Life Pty in Sydney. “When the situation gets resolved, prices will fall by about $5 to $6.”

Crude for February delivery rose as much as $1.02 to $102.33 a barrel in electronic trading on the New York Mercantile Exchange. It was at $102.30 at 4:32 p.m. Singapore time. Yesterday, the contract slid 0.3 percent to $101.31, the lowest close since Dec. 30. Prices advanced 8.2 percent in 2011, the third annual increase.

Brent oil for February settlement on the London-based ICE Futures Europe exchange climbed as much as 81 cents, or 0.7 percent, to $113.26 a barrel. The European benchmark contract was at a $10.92 premium to New York-traded West Texas Intermediate grade. The spread was a record $27.88 on Oct. 14.

Strait of Hormuz

Oil in New York has gained 3.1 percent this year amid Iranian threats to block the Strait of Hormuz in response to U.S. and European sanctions over its nuclear program. The waterway carries 17 million barrels of oil a day, according to the U.S. Energy Department, almost 20 percent of global consumption.

Iran has begun enriching uranium at a heavily fortified underground site, the International Atomic Energy Agency said yesterday. The European Union is weighing whether to move up a Jan. 30 meeting of foreign ministers by a week to consider an embargo on imports of oil from OPEC’s second-largest producer, according to a diplomat.

“The supply-side shock potential is keeping the oil price where it is,” said David Lennox, a resource analyst at Fat Prophets in Sydney, who forecasts New York crude will average $110 a barrel this year. “The situation in Europe is impacting on economic growth, but we think that story is so well factored into the market now.”

Iran is unlikely to block the strait because it would suffer the most, according to Dennis Ross, who served two years on the National Security Council as U.S. President Barack Obama’s special assistant on Iran. The U.S. hasn’t seen any efforts to close the route to shipping, Pentagon spokesman George Little said yesterday.

Nigeria Protests

“Any Iranian action in defense of their sovereignty is Iran’s issue,” Ramirez told reporters in Caracas yesterday, where Iranian President Mahmoud Ahmadinejad met his Venezuelan counterpart, Hugo Chavez. “OPEC can’t get involved in this issue.”

A general strike in Nigeria has entered a second day, threatening shipments by Africa’s biggest oil producer. The strike so far hasn’t affected the oil exports of Royal Dutch Shell Plc’s venture, which has the largest operations in the country, Tony Okonedo, a company spokesman, said yesterday by phone from Lagos. Protesters are opposed to the government’s decision to end fuel subsidies.

Nigeria, an OPEC member, produced an average 2.2 million barrels a day of crude in December, according to data compiled by Bloomberg. It is the fifth-largest supplier of oil to the U.S. At least 90 percent is pumped by Shell, Exxon Mobil Corp., Chevron Corp., Total SA and Eni SpA in joint ventures with state-owned Nigerian National Petroleum Corp.

U.S. Stockpiles

Crude supplies in the U.S., the world’s biggest oil consumer, probably rose 1 million barrels last week, according to the median estimate of nine analysts surveyed by Bloomberg News survey an Energy Department report tomorrow. An increase would match the longest run of stockpile gains since the three weeks ended May 6.

Gasoline inventories may have climbed 2 million barrels last week to 222.2 million, the highest in almost 10 months, the survey showed. Distillate-fuel supplies, a category that includes heating oil and diesel, are expected to have gained 2 million barrels.

Bloomberg

Petroplus, Europe’s largest independent refining company, this week began shutting down three of its five refineries, halting about a quarter of a million barrels of daily production.

The move by the refiner follows plans by other operators to mothball half the refining capacity on the US Atlantic coast. Since the 2008-09 financial crisis, 2.6m barrels a day of capacity has disappeared from advanced economies, according to the International Energy Agency. More closures are coming.

These decisions will have a lasting impact on petroleum markets, say analysts. Refineries are the main customers for the world’s oil producers. Shutting down one plant reduces demand for the types of crude oil it uses if other refineries do not fill the gap.

In the case of Petroplus, half the oil its refineries process is similar to the high-quality, low-sulphur Brent crude traded on the ICE Futures Europe exchange, according to Bank of America Merrill Lynch Global Research. Spot markets for the benchmark North Sea grade, trading at more than $113 a barrel, could weaken as a result.

Cheaper crude prices do not necessarily mean cheaper fuel for drivers, airlines and trucking companies. Fewer refineries hand those that are left greater influence over prices on the forecourt. After Swiss-based Petroplus warned it faced a credit freeze last week indicative refining margins jumped in north-west Europe, according to data from the IEA and Purvin & Gertz, the consultants.

“When refineries close you have: number one, less demand for crude oil; and two, less supply of products,” says Francisco Blanch, head of commodities research at BofA Merrill Lynch. The bank expects refiners to cut 1m b/d of capacity this year.

Just over a decade ago, George W. Bush, then US president, declared: “What this nation needs to do is to build more refining capacity.” Then, in 2001, US refineries ran at 93 per cent of capacity. Now they are running at 86 per cent. The amount of idle crude oil distillation capacity has more than trebled to almost 1m b/d, US Energy Information Administration statistics show.

There are several reasons for this. The US refining industry responded to Mr Bush’s call. The ethanol industry took off, supplementing petrol supplies with fuel from corn. Strict new standards for sulphur and other pollutants were expensive for older refineries to meet.

Oil prices later rose and the financial crisis struck in 2008, sapping petrol demand. Europe’s debt crisis has not only slowed its economy but crimped access to loans for refiners such as Petroplus, which on Thursday announced its access to revolving credit had been suspended. Since mid-2008, nine refineries have closed in Europe, the IEA says.

“We still see more closures to come in Europe,” says Toril Bosoni, IEA refining analyst.

On the US east coast, Sunoco is selling refineries at Marcus Hook and Philadelphia, in Pennsylvania. It idled Marcus Hook last month. ConocoPhillips idled and put a nearby refinery on the auction block in September. Together these three units comprise more than half the refining capacity for a region that includes Boston, New York and Washington.

The closures come as global oil demand is set to break records this year. But the bulk of the consumption growth is in Asia and, to a lesser degree, the Middle East. It is to these regions that refiners have migrated. Many newer refineries are more complex than older plants in the west, and thus able to buy a slate of cheaper crudes to make a wider array of fuels and chemicals.

“You built to meet the expected growth in the region and have more capacity than is currently required,” says David Greely, commodities analyst at Goldman Sachs.

Oil markets are reacting. After Petroplus disclosed the credit freeze on December 27, profit margins for refiners using Brent jumped back into the black. These so-called “crack spreads” have been negative for much of the past year.

The price of Brent crude has meanwhile jumped on jitters over Iran, which has threatened to shut down a main tanker route as the west moves towards an embargo on Iranian oil imports. BofA Merrill Lynch nevertheless says Petroplus shutdowns “should increase the availability of light sweet crude oil in Europe” and thus weaken the premium for spot Brent over that of crude for later delivery dates.

With the US east coast closures, fuel suppliers may be forced to import more petrol from Europe, while Europe may need to buy more diesel from plants on the US Gulf of Mexico coast.

“Greater transportation distance and greater holding of stocks will probably have a cost impact,” says Mindi Farber-DeAnda, EIA oil economist. “We could potentially see higher and more volatile pricing.”

Casualty of crisis

Petroplus is shaping up to be a casualty of expensive crude and the European debt crisis.

Europe’s largest independent refiner on Thursday said all its revolving credit lines were suspended. Petroplus is shutting down its Petit Couronne refinery in France, with 162,000 b/d capacity; Antwerp, Belgium, with 108,000 b/d capacity; and Cressier, Switzerland, with 68,000 b/d capacity. Its UK and German refineries are still open.

The company’s losses mounted after high-quality crude prices soared when Libya’s output stopped last year, while Europe’s fuel demand is sluggish.

FT.com

Futures gained as much as 2.2 percent on the first trading day of 2012. India’s Purchasing Managers’ Index rose the most in six months in December, HSBC Holdings Plc and Markit Economics said yesterday, and a manufacturing index in China signaled expansion. Iran’s Deputy Navy Commander Rear Admiral Mahmoud Mousavi told Press TV that any effort to harm the nation’s interests will lead to “reciprocal measures.”

“The new year seems to be bringing fresh buying into oil and other markets,” said Christopher Bellew, a senior broker in London at Jefferies Bach Ltd., who predicts Brent prices will remain above $100 a barrel in London. “Oil will not be held back by Europe as the economic recovery in the U.S. and growth in emerging markets is more important. Iran and Syria are another potential reason for oil to go higher.”

Crude for February delivery advanced as much as $2.17 to $101 a barrel in electronic trading on the New York Mercantile Exchange and was at $100.89 at 9:09 a.m. London time. Oil gained 8.2 percent in 2011, the third consecutive yearly gain.

Brent oil for February settlement rose $2.19, or 2 percent, to $109.57 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate futures was at $8.74, compared with a record $27.88 on Oct. 14.

Brent’s premium to WTI has declined as Libya resumed production of light, sweet crude after last year’s uprising against Muammar Qadaffi. The nation exported a cargo of Es Sider grade from the port of the same name on Jan. 1, the National Oil Corp. said in a website notice. It is the first shipment of the blend from that location since the rebellion.

Iran Sanctions

Crude also rose as the U.S. and its allies increased pressure on Iran to halt what they say may be a covert nuclear weapons program. Sanctions signed into law by President Barack Obama on Dec. 31 aim to deter dealings with the Iranian central bank. The European Union, which is considering a ban on oil from Iran, will be ready by Jan. 30 to decide whether to extend sanctions, Michael Mann, a spokesman for the EU, said yesterday.

Iran, OPEC’s second-largest producer, doesn’t intend to disrupt shipping in the Strait of Hormuz, Mousavi said yesterday, according to Press TV. Almost 17 million barrels a day of crude moved through the channel last year, the U.S. Energy Department said in an update on “world oil transit chokepoints.” Saudi Arabia is the largest exporter in the Organization of Petroleum Exporting Countries and sends some oil shipments through the strait.

Manufacturing Growth

China’s purchasing managers’ index rose to 50.3 in December from 49 in November, the Beijing-based logistics federation said Jan. 1. A number above 50 indicates expansion. The country accounted for about 11 percent of the world’s oil consumption in 2010 and India for 4 percent, according to BP Plc’s Statistical Review of World Energy. The U.S. is the world’s biggest crude user at 21 percent.

“Iran is the wildcard,” said Jonathan Barratt, chief executive officer of Barratt’s Bulletin in Sydney. “There’s still concern that Iran, when pushed, will do something. The manufacturing data also provides a bit of confidence.”

German unemployment fell more than forecast in December as exports of cars and machinery boomed and one of the mildest winters on record helped support jobs in construction.

The number of people out of work fell a seasonally adjusted 22,000 to 2.89 million, the Nuremberg-based Federal Labor Agency said today. Economists forecast a decline of 10,000, the median of 20 estimates in a Bloomberg News survey showed. The adjusted jobless rate dropped to 6.8 percent.

Hedge funds expanded wagers on rising oil prices by 7.6 percent, or 13,585 contracts, to 192,446 in the seven days ended Dec. 27, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report last week.

Bloomberg

Futures gained as much as 0.8 percent and were up 4.1 percent for the week. European governments tightened sanctions on Iran, the second-biggest oil producer in the Organization of Petroleum Exporting Countries, in a clampdown over the Persian Gulf nation’s nuclear program. The U.K. yesterday ordered Iran to close its embassy in London after a mob attack on the British legation in Tehran bought international condemnation.

“We have a dangerous possibility of a war, at the worst, so we always have to put some premium in this market,” said Ken Hasegawa, a commodity sales manager at broker Newedge Group in Tokyo, who sees New York oil futures trading between $98.50 and $101.50. “Even though the economic situation is worse than at the beginning of the year, the oil price will be staying at this high level.”

Crude for January delivery was up 60 cents at $100.80 a barrel in electronic trading on the New York Mercantile Exchange at 4:12 p.m. in Singapore today. It earlier declined as much as 31 cents to $99.89 a barrel.

Brent oil for January settlement was at $109.85 a barrel, up 86 cents, on the London-based ICE Futures Europe exchange. The contract slid $1.53, or 1.4 percent, to $108.99 yesterday.

The European contract’s premium to West Texas Intermediate crude traded in New York declined 16 cents to $9.05 a barrel. The spread surged to a record $27.88 on Oct. 14.

Jobless Rate

Oil also rose before a U.S. Labor Department report today that may show 125,000 workers were added last month, according to the median estimate in a Bloomberg News survey of economists. The jobless rate probably held at 9 percent, the survey showed.

Oil futures may fall next week as unemployment stays near that level, a separate Bloomberg News survey showed. Eleven of 24 analysts, or 46 percent, forecast oil will fall through Dec. 9. Nine, or 38 percent, predicted a gain, and four said there will be little change. Last week, 57 percent of those surveyed projected a drop.

Bloomberg

Cross-border transfer capacities will be sufficient to balance electricity supply and demand across Europe under normal weather conditions, Entso-E said in its Winter Outlook Report. “It is when winter conditions become extreme and widespread that there is a significant risk to security of supply in some major European areas,” Entso-E president Daniel Dobbeni said.

Europe’s transmission system operators (TSOs) will be “on alert” this winter, largely because winter reserve capacities are lower than in previous years as a result of Germany’s decision to close 8.4GW of nuclear generation capacity in response to the accident at Japan’s Fukushima-Daiichi plant in March.

Germany, Europe’s biggest power market, could require imports even under normal temperature conditions on days with high demand and low feed-ins from wind and solar power. Serbia, Finland, Denmark and Latvia could also need imports to meet demand and reserve requirements during average temperatures.

But “there are no issues under normal conditions because cross-border transfer capacities are sufficient to provide imports to those countries and regions that require it”, the report concluded.

Sustained low temperatures will put power systems under pressure, most notably in France and Germany.

While the review indicates that power demand will be met and reserves maintained under severe conditions, it adds that cross-border supply will be more crucial than in the past to ensure system security.

The first two weeks in December, weeks 49 and 50, are the most critical as cross-border flows will need to reach their maximum to maintain power grid stability under severe conditions. France, heavily dependent on electrical heating, might need to import up to 7GW during these weeks if there is a sustained cold spell, with Germany unlikely to be able to assist its neighbour with exports.

“The key week for Europe is probably week 50, when France and Germany simultaneously require peak imports for the winter period under severe conditions,” Entso-E said. Some weeks in January and February could also see risks to security of supply, according to the review.

All TSOs on the French and German borders will need to closely co-ordinate their efforts to maintain grid stability and ensure maximum cross-border transfer capabilities during these weeks by taking measures such as redispatching of power plants.

Germany’s four TSOs could take further measures such as reducing wind infeed in the north, and implementing manual load shedding and demand-site management to ease the pressure on the country’s north-south connection. Germany can also call on 1GW of reserve capacity and has secured 900MW of reserve capacity in Austria.

Finland and Latvia will be dependent on imports to meet peak demand if there are severe conditions, while Belgium, Denmark and the UK could require imports to maintain reserve margins.

There is an urgent need for European countries to reinforce their electricity grids beyond this winter to accommodate “major changes in generations observed all over Europe”, with the EU proposing the speeding up of approval processes for infrastructure projects, Entso-E said.

Argus Media

That is according to new research by global strategy consultancy AT Kearney, which reveals that worldwide gas prices could increase by as much as 40% by 2014.

According to the research this spike will then be followed by falling prices and overcapacity, as well as growing pressure on business models of up- and midstream gas companies.

Developments in the international and European gas markets and global demand for gas and liquefied natural gas (LNG) will, the research claims, make 2015 a ‘watershed’ for gas markets.

The work found gas is becoming ever more important as an energy source at the global level, with an annual growth rate of 1.7%.

However, gas consumption within Europe will, according to AT Kearney, gain just 0.4% per year.

AT Kearney energy practice partner, Richard Forrest, said: “Over the past years, the European gas market has become incredibly dynamic owing to the changes in supply and demand.

“During the course of the economic crisis, not only did the level of gas consumption nosedive, but the origin of the gas also underwent massive changes and Europe began to move ever closer to the international gas markets.”

Edie Newsroom