NEW YORK -- Oil rose more than 2 percent to top $55 a barrel Friday on expectations cold weather in top consumer the United States would trigger a long-awaited rise in heating oil demand.
U.S. crude settled up $1.19 at $55.42 a barrel, after a $1.14 slide Thursday. London Brent crude jumped $1.17 to $55.29.
"OPEC cuts are gradually draining the surplus and winter has finally returned," said Nauman Barakat, senior vice president at Macquarie Futures USA.
He added that a risk premium was coming back to the market as political tensions between the United States and Iran grew.
Temperatures in the U.S. Northeast, the world's biggest heating oil market, were expected to stay below normal for at least the next week, according to AccuWeather.
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Unseasonably mild weather and a shift in fund flows had pushed oil down by as much as 18 percent this month, but the market's failure to break significantly below $50 a barrel last week has led to a rebound in prices.
"With weather forecasts constantly shifting back and forth, price action should be expected to remain volatile with a downward basis," said Mike Fitzpatrick, vice president for energy risk management at Fimat USA.
The Organization of the Petroleum Exporting Countries has said it would wait to assess the impact of existing cuts before calling for further reductions.
The cartel agreed last year to curb output by 1.2 million bpd, or 4 percent, from Nov. 1 and another 500,000 bpd from Feb. 1 this year after a sharp slide in prices.
OPEC oil exports fell by close to 1.9 million day (bpd) from October to the end of December, according to shipping data released by Lloyd's Marine Intelligence Unit Friday.
But a report by Roy Mason of oil consultancy Oil Movements released Thursday said OPEC exports will rise 270,000 barrels per day (bpd) in the four weeks to Feb. 19.
Rising geopolitical tensions, which helped push U.S. crude to a record over $78 in July, added support to prices.
The Bush administration in recent weeks has toughened its stance against major oil producer Iran, which the West has accused of seeking to build secretly an atomic bomb. (Additional reporting by Maryelle Demongeot and Randy Fabi in London and Matthew Robinson in New York)
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