Oil prices settled over the $48 mark as a spell of cold weather in the US Northeast drove process to a 14% increase since the start of the year.

February crude rose $0.14 to $48.10 a barrel.

The oil price jump was caused in part by an 8% rise in gas prices due to colder weather in the US Midwest.
"This is a short-term reaction to what should be expected for weather conditions during winter," said Daniel Hynes at ANZ Bank in Melbourne.

"The overall trend of heating oil stocks has been up because of relatively mild winter weather. Until we start seeing a big inventory drawdown, these price spikes will be short lived," he said.

The other culprit cited by market analysts as responsible for the rise in prices is the hedge funds that drive the prices up on the speculation of continuing strength in global demand.

Andrew Lebow, a senior vice president at Man Financial Inc. in New York, called the January rally "more psychological than fundamental."

Disruptions on the Iraqi pipelines in the Kirkuk oil fields bringing oil to the Turkish port of Ceyhan also factored into prices. Power disruptions in the south led to a 10% cut in February-June Basra Light sales, reducing them by 160,000 bpd.

The continuing spell of nasty weather in the North Sea prevented the production operations in the North Sea and at Latvia’s Ventspils terminal and in Turkey’s Bosphorus and Dardanelles straits.

Supply cuts caused by the OPEC decision to remove the excess of 1million bpd over the cartel’s quota added more strength to the prices.