By Sherry Su Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Crude futures rose slightly Friday partly due to expectations of higher heating demand spurred by cold weather in the U.S. and Europe. Crude futures in New York posted more gains partly because of short covering after a fire at Suncor Energy's oil sands upgrader Tuesday. But a firm dollar, which is now at a three-month high against the euro, continued to keep a lid on oil prices. Trading activities were light due to a lack of major economic data and the approach of holiday season. At 1130 GMT, the front-month February Brent contract on London's ICE futures exchange was up $0.67 at $74.04 a barrel. The front-month January light, sweet, crude contract on the New York Mercantile Exchange was trading $0.99 higher at $73.64 a barrel. The ICE's gasoil contract for January delivery was up $9.25 at $601.00 a metric ton, while Nymex gasoline for January delivery was up 226 points at 187.46 cents a gallon. The fire at one of Suncor Energy's two oil sands upgraders north of Fort McMurray, Alberta, occurred Tuesday, and was extinguished within one hour. Suncor expected repairs to take between two and four weeks and production is expected to be reduced by around 120,000 to 150,000 barrels a day. This could translate into "lower flows of Canadian crude oil into the Midwest which would then lower the rate of stockbuilding in Cushing," said Olivier Jakob, managing director of Swiss consultancy Petromatrix. "Based on the current stockbuilding rate, the amount of lost production would not be enough to force stockdraws but would be enough to leave the stock levels balanced and this then considerably lowers the potential for the spreads to go into an abnormal contango," he said. Despite the Suncor fire, "we would not go overly bullish on it because at the same time the crack values are coming off and especially so in Gasoline," he added. Meanwhile, sluggish oil demand and high inventories may suggest the short-term outlook for the oil market is still far from rosy. "We did see an increase in distillate demand, of 472,000 bpd [barrels per day]. But that still only bumped consumption up to less than 3.8 million bpd. That is a far cry from the 4.5 million bpd and more that one might normally expect during bitterly cold weather," said Peter Beutel, president of trading advisory firm Cameron Hanover. "The bottom line is that fundamentals are improving, but they still do not justify higher prices; they could justify lower prices, though," he said. Look ahead, crude futures may face some downward pressure if the dollar continues to strengthen in coming days, said Edward Meir at MF Global. "Bulls should also be somewhat nervous about Monday's January WTI expiration and the upcoming OPEC meeting the following day," he said. "Although the cartel's decision is well discounted by now, we might see the markets weaken once the actual announcement comes out, as it will only reinforce how behind the curve OPEC really is," he added.

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