By Grant Smith and Yee Kai Pin Jan. 12 (Bloomberg) -- Crude oil fell for a second day on forecasts cold weather in the eastern U.S. will abate this week, curbing heating fuel demand in the world’s biggest energy user. Oil declined after a prediction that above-normal temperatures will begin moving into eastern cities including New York and Boston later this week, according to MDA Federal Inc.’s EarthSat Energy Weather. The Northeast accounts for about four- fifths of the country’s heating oil consumption. “The cold weather drove the recent run higher and now oil is taking a breather,” said Andrey Kryuchenkov, an analyst with VTB Capital in London. “While the economic outlook is still positive, the overhang in supplies shows prices ran ahead of themselves and should now remain range-bound between $79.75 and $82.” Crude oil for February delivery fell as much as 93 cents, or 1.1 percent, to $81.59 a barrel in electronic trading on the New York Mercantile Exchange. The contract was at $81.87 a barrel at 9:10 a.m. London time. Futures reached $83.95 a barrel yesterday, the highest since Oct. 14, 2008, on a report China’s crude imports reached a record last year. The country is the world’s second-largest energy consumer. The dollar gained against higher-yielding currencies, damping the investment appeal of commodities. It rose as much as 0.4 percent to $1.4454 per euro, from $1.4513 yesterday in New York. Average Temperature The average temperature in New York was 27 degrees Fahrenheit (minus 3 Celsius) during the first 10 days of 2010, according to the National Weather Service. That’s 6 degrees below normal. Oil rose 4.3 percent over that period. “The cold snap in the U.S. seems to be breaking,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “Distillates and heating oil could see some demand coming off in the coming weeks and months.” U.S. distillate fuel stockpiles probably declined for a fifth week as demand increased during the cold snap. Supplies including heating oil and diesel dropped 1 million barrels last week, based on the median estimate from 11 analysts surveyed by Bloomberg News. Nine respondents forecast a reduction in stockpiles and two predicted a gain. Distillate inventories fell to 159 million barrels in the week ended Jan. 1, 16.1 percent above the five-year average level, according to the Energy Department. U.S. crude oil and gasoline inventories are expected to have increased a second week last week, the Bloomberg survey showed. The Energy Department will release its Weekly Petroleum Status Report at 10:30 a.m. tomorrow in Washington. Brent crude oil for February settlement dropped as much as 89 cents, or 1.1 percent, to $80.08 a barrel on the London-based ICE Futures Europe exchange. The contract, declining for a fourth day, was at $80.45 a barrel at 9:12 a.m. London time. To contact the reporters on this story: Yee Kai Pin in Singapore at kyee13@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net

Source