Oil prices hit a seven-week high hovering above $49 a barrel on the forecasts of colder weather, threat of disruptions in the Middle East, and predictions of higher demand.

February crude rose $0.91 to $49.29 a barrel.

The U.S. National Weather Service expects a colder-than-normal spell in the US Northeast, home to 80% of the nation’s heating oil users, in the period from Jan. 23 through Jan. 27.

Another factor that contributed to the price rise is the concern that OPEC may decide to cut output in its January meeting.

``The question is if we are going to have a surge in demand like the one which surprised all of us except the hedge funds last year,’’ said Robert Skinner, director of the U.K.-based Oxford Institute for Energy Studies.

`OPEC has got to watch what the weather, and what the funds are signaling, because they turned out to be right.’’

The International Energy Agency released a report on Tuesday that says oil demand growth will slow in 2005 after rising 3.3% last year. Still, supply was behind expectations in 2004, as non-opec countries raised exports by only by 1.4 million barrels a day, while forecasts gave the number of 1.9 million b/d.

IEA remains worried that oil producers may not cope with meeting the global demand even against the drop in demand. Even with the increase in exploration research, the drilling and service companies will need years to develop the capacity to develop new reserves. The refineries too can turn out to be squeezed for capacity in case of a surge in demand.

As a result, IEA raised its ‘call’ on the OPEC members for 2005 by 300,000 b/d to 28.0m b/d. The organization sees OPEC spare capacity to equal only 1 million b/d.