By Myra P. Saefong, CBS.MarketWatch.com
SAN FRANCISCO (CBS.MW) -- Crude and heating-oil futures climbed 5 percent Thursday to close at their highest levels in two weeks with U.S. crude inventories on the decline, distillate stocks still well below year-ago levels, and a fresh labor dispute emerging in Venezuela.
Crude oil for February delivery closed at $45.56 a barrel on the New York Mercantile Exchange, up $2.17. The contract, which lost 52 cents on Wednesday, jumped to a high of $45.75 in late morning trade, a level not seen since Dec. 22.
February heating oil tacked on 6.29 cents to close at $1.2813 a gallon, after falling 2 percent in the previous session. February unleaded gasoline added 5.19 cents, or 4.4 percent, to end at $1.2229 a gallon.
The potential for an oil-worker strike is on the rise in Venezuela for the first time since President Hugo Chavez was reelected late last year, according to Phil Flynn, a senior analyst at Alaron Trading. Oil workers and the government are reportedly arguing over a tentative labor agreement reached last week, he said.
So far, it looks as if the dispute won't have much of an impact, but it was "one more reason not to be short the market," Flynn said. The reports are leading some "oil traders to worry that there may be a potential showdown coming in the future" that could lead to a disruption in Venezuela's oil output, he said.
The United States has been using Venezuelan crude to help keep up with strong demand, he said. The country, which produced 2.6 million barrels per day in 2003, is fourth-biggest U.S. oil supplier.
Speculation of disruptions or potential disruptions at some Venezuelan facilities has "certainly contributed to underlying fears of supply problems," said Kevin Kerr, president of Kerr Trading International.
Thursday's spike in prices could also be seen as a technical move, according to Jeff Mokychic, head analyst at Bridgeton Global Investor Services. "A lot of buy stops have been triggered as February crude got above $44.35," he said.
And weather remains a dominant factor in the energy market, said James Williams, an energy economist at WTRG Economics, with a winter storm in the Northeast likely to increase demand for heating oil.
Oil-product stocks up, but at crude's expense
"The demand for distillates is extraordinarily strong," even during a week when there was "no weather challenge to contend with," said Flynn.
The Energy Department said Wednesday that supplies of distillates, including heating oil, rose 2 million barrels for the week ended Dec. 31, while the American Petroleum Institute pegged the size of the increase at 4.6 million barrels.
Despite the supply climb, distillate inventories are still more than 11 percent below the year-ago level, according to government data.
The rise in petroleum-product stocks followed an increase of 0.6 percentage point in refinery utilization, to 94.8 percent of capacity.
"Even with this, record production is barely keeping pace with demand," Flynn said, adding that "a sharp increase in demand could have us seeing a supply drop."