By Mark Shenk Nov. 17 (Bloomberg) -- Crude oil rose on speculation that U.S. heating-fuel consumption will increase as a cold weather system moves across the eastern U.S. and a tanker owned by Saudi Aramco was hijacked by pirates. Temperatures on the East Coast will be below normal from Nov. 22 to Nov. 26, according to the National Weather Service. A supertanker was hijacked by Somali pirates off the coast of Kenya, the U.S. Navy said. Oil fell earlier because Japan entered a recession and on signs that Chinese demand is falling. “We’ve come down quite a bit, and today we’ve got the arrival of winter weather and the noise about the Saudi tanker being hijacked,” said Antoine Halff, head of energy research at Newedge USA LLC in New York. “A one-day rally doesn’t change the downward trend of the market.” Crude oil for December delivery rose 61 cents, or 1.1 percent, to $57.65 a barrel at 10:58 a.m. on the New York Mercantile Exchange. Futures have tumbled 61 percent since reaching a record $147.27 on July 11. The Saudi-operated Sirius Star was more than 450 nautical miles southeast of Mombasa when a group of pirates scaled the 10- meter (32-foot) side of the ship, U.S.. Navy Lieutenant Nate Christensen said in a phone interview from Bahrain, where the Fifth Fleet is based. The tanker is designed to carry more than 2 million barrels of crude oil. “The reaction to the Saudi tanker story is indicative of the change in sentiment,” said Kyle Cooper, an analyst at IAF Advisors in Houston. “If this story hit six months or a year ago, we would be up $5 or $6.” Longer Route The attacks may force shipping away from the Gulf of Aden to take the longer route to Europe and North America around South Africa’s Cape of Good Hope. The extra weeks of sailing and fuel consumption could have a major impact on oil and commodity prices, Chatham House, a London-based research organization said. Iran, the Organization of Petroleum Exporting Countries’ second-largest producer, may seek an output cut of as much as 1.5 million barrels a day when the group meets in Cairo later this month, the Associated Press reported Nov. 15, citing televised comments by the nation’s OPEC Governor Mohammad Ali Khatibi. Japan, the world’s third-biggest oil consuming country, contracted 0.4 percent in the third quarter, official figures today showed. It is the country’s first recession since 2001. China National Petroleum Corp., the nation’s biggest producer, said demand has fallen “sharply” since September because of credit-market turmoil. China is the world’s second- biggest oil consumer. “Overwhelming Trend” “The overwhelming trend is that global demand is down sharply, led by the drop in the U.S.,” Halff said. “It’s now becoming clear that the Chinese economy is being hit harder than expected by what is happening in the U.S. I don’t think we’ve fully factored in the slowdown in China.” Leaders from the Group of 20 urged a “broader policy response” to the financial crisis at a weekend meeting in Washington, citing the potential for additional interest-rate cuts and fiscal stimulus. “Nothing concrete came out of the G-20 meeting, which increases pressure on all asset classes,” said John Kilduff, senior vice president of risk management at MF Global Inc. in New York. “China is raising alarm bells about an economic slowdown. This is the last shoe to drop as far as demand is concerned.” OPEC reduced its forecast for average oil consumption next year by 530,000 barrels a day, or 0.6 percent, to 86.68 million barrels a day, according to its monthly oil market report. The International Energy Agency and U.S. Energy Department slashed demand projections last week. “OPEC’s big demand revision is setting us up for a further production cut,” said Bill O’Grady, chief markets strategist at Confluence Investment Management in St. Louis. “I think the Saudis would be happy with oil between $70 and $80, and that’s where we will end up.” Brent crude oil for January settlement rose 79 cents, or 1.5 percent, to $55.03 a barrel on London’s ICE Futures Europe exchange. To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.

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