NEW YORK: World oil prices rose on Tuesday on expectations of a bigger drawdown of stockpiles in the United States, where cold weather could boost demand for heating fuel.
New York's main futures contract, light sweet crude for delivery in February, rose 10 cents to settle at 78.87 dollars a barrel.
London's Brent North Sea crude for February delivery gained 32 cents to 77.64 dollars per barrel.
Market sentiment was boosted by expectations that the Department of Energy (DoE) will report on Wednesday a drop in US stockpiles for the week ending December 25 amid the cold weather across much of the country.
Most analysts expect crude oil inventories to fall by 1.7 million barrels and distillate stocks, including diesel and heating oil, to drop 2.1 million barrels.
"The market is definitely waiting for the Department of Energy stats tomorrow because we had some cold weather in the Northeast and there is an expectation of a distillates inventories decline, as well as a crude oil inventories decline as we head towards the end of the year," said analyst Andy Lipow of Lipow Oil Associates.
The market won further support from geopolitical tensions sparked by the crackdown on protests by major crude producer Iran, and from the oil transit dispute between Russia and Ukraine.
"Colder weather in North America, geopolitical concerns over Iran, the latest chapter in the Russo-Ukrainian dispute, as well as expectations of further crude stockdraws in the US may have provided support," analysts at the JBC Energy consultancy in Vienna said in a client note.
Oil prices had jumped last week as a larger-than-expected drop in US energy stockpiles had sparked hopes of rising demand.
DoE data released last Wednesday had shown US crude stockpiles dropping 4.9 million barrels to 327.5 million in the week ending December 18.
On Tuesday, meanwhile, Russia and Ukraine agreed new terms for transit of Russian oil to Europe, averting another year-end energy crisis after Prime Minister Vladimir Putin accused Kiev of "abuse" on the deal.
A spokeswoman for the Russian energy ministry in Moscow confirmed that a new agreement had been concluded but declined to provide details.
Officials in both countries said the agreement only covered 2010.
A dispute between Russia and Ukraine on natural gas prices last year led to a cut-off of Russian gas supplies to Europe and severe shortages in some countries amidst freezing winter weather.
The oil agreement came a day after the European Union announced that Russia had triggered an "early warning mechanism" advising EU states of the possibility of disruption to Russian oil supply pumped via Ukraine.
The Ukrainian state oil pipeline monopoly, which is owned by Naftogaz, acknowledged on Monday that it was seeking changes to terms of its 2004 oil transit contract with Russia. - AFP/de
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