Activity in the U.S. oilfield already reflects expectations for anemic demand. Baker Hughes Inc. reported Friday the number of rigs actively exploring for oil and natural gas in the United States fell by 98 last week to 1,623. That's nearly 16 percent fewer rigs at work than when oil prices peaked in July, and 9 percent below the year-ago figure.
The Department of Energy said Friday it plans to take advantage of the huge drop in crude prices and is soliciting bids to buy 12 million barrels of oil this year to replenish the nation's Strategic Petroleum Reserve. The reserve is an emergency depot maintained by the Energy Department and can hold as much as 727 million barrels of oil in salt caverns along the Gulf Coast. The DOE said the new supplies will replace those used after hurricanes Katrina and Rita severely crimped oil supplies in 2005.
The February contract for crude rose $5.57 on Wednesday, the last trading day of 2008, to settle at $44.60 after Russia threatened to cut off natural gas supplies to Ukraine. Russia followed through with that threat Thursday, though both countries pledged they would keep supplies to the rest of Europe flowing.
As of late Friday afternoon, no interruptions outside Ukraine were reported.
Analyst Olivier Jakob of energy analysis firm Petromatrix in Switzerland said Ukraine has enough reserves to avoid an immediate risk to its supplies, as long as both parties find an agreement by the end of next week.
The European Union depends on Russia for about a quarter of its gas, with about 80 percent of that delivered through pipelines controlled by Ukraine.
Concerns that the week-old conflict between Israel and Hamas in Gaza could disrupt supplies in the oil-rich Middle East helped keep prices from falling further.
The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global supply, has announced production cuts totaling more than 4 million barrels per day in the last few months. Analysts say crude's direction in the early part of 2009 will be linked largely to whether the cartel adheres to the new quotas.
The national average at the pump rose slightly overnight but remains well below year-ago levels. The national average for regular unleaded rose eight-tenths of a cent to $1.626 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. Still, prices are down 17.7 cents from a month ago and $1.426 from a year ago.
In other Nymex trading, gasoline futures rose 4.85 cents to $1.11 a gallon. Heating oil rose 3.8 cents to settle at $1.48 a gallon, while natural gas for February delivery jumped 24.9 cents to $5.971 per 1,000 cubic feet.
In London, February Brent crude rose $1.32 to settle at $46.91 a barrel on the ICE Futures exchange.
"If there is a disruption in natural gas supplies to Europe, then you will see an increase in the usage of oil instead of natural gas. It will have an impact on oil prices," Jakob said.
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