* Russia-Ukraine gas dispute rumbles on, supplies still cut
* IEA cuts forecast for 2009 oil demand by almost 1 mln bpd
* Dollar weakens against basket of currencies
* Bank of America, Merrill Lynch, Citigroup post huge losses
(Updates prices)
By Christopher Johnson
LONDON, Jan 16 (Reuters) - Oil edged up towards $36 a barrel
on Friday as cold weather across the northern hemisphere boosted
demand for heating fuel and a dispute between Russia and Ukraine
kept supplies of Russian gas to Europe low.
The European Commission said on Friday Russia and Ukraine
had a last chance this weekend to solve the dispute blocking gas
supplies or risk seeing their relations with the bloc suffer.
The European Union normally gets a fifth of all its gas from
Russia via Ukraine. The loss of this supply has forced
generators to switch to oil and coal at a time when Europe is
experiencing sub-zero temperatures.
U.S. light crude for February delivery <CLc1> was up 10
cents at $35.50 a barrel by 1517 GMT, after earlier hitting a
high of $36.73. The contract, which expires on Tuesday, briefly
touched a low of $34.77. On Thursday, it sank to $33.20, the
weakest in nearly a month.
London Brent crude for March <LCOc1> was flat at $47.68,
maintaining an unusual premium to the U.S. benchmark due to
growing U.S. stockpiles.
"The cold weather is increasing demand for heating fuel and
the Russia-Ukraine gas dispute is a factor too, at least for the
market in Europe," said Christopher Bellew, broker at Bache
Financial in London.
A dealer at a European trading house agreed the gas dispute
was beginning to have an impact on the market in Europe: "It is
mid winter and many power companies can't get their usual fuel."
Traders said a weaker dollar and stronger equities were also
helping bolster the oil market.
IEA SLASHES DEMAND FORECAST
The market appeared to brush off bearish data from the
International Energy Agency, which cut its forecast for world
oil demand this year sharply.
The IEA said in its monthly oil report that world oil demand
would contract as the economic slowdown eroded consumption. The
agency revised its estimate for 2009 demand down by 940,000
barrels per day (bpd) to 85.3 million bpd -- a fall of about
500,000 bpd year-on-year. []
The price of oil for delivery in February is down about 10
percent overall this week, as a string of dismal figures from
major economies stung investor confidence and portended further
weakness in oil demand in months ahead.
"Global oil demand is reducing at an alarming rate," said
Rob Laughlin, senior oil analyst at MF Global in London.
"This latest report from the IEA is another warning shot
across the bows to OPEC that supply is still outpacing demand
and the situation is getting worse, seemingly day by day."
"Whilst OPEC is making an effort to adhere to quotas, the
clear picture shows that another cut is required and soon."
In its report, the IEA said Chinese oil demand would grow at
its slowest rate in eight years, rising just 90,000 bpd in 2009
as its GDP growth slows to 6.5 percent.
OPEC, which has already cut 4.2 million bpd in supply from
the world market since September, could quickly deepen output
cuts if needed, OPEC President Botelho de Vasconcelos has said.
[]
The global financial crisis has forced many economies into
recession, reducing energy consumption and dragging down oil
prices by more than $110 since a record peak in July.
Bank of America <BAC.N>, which recently absorbed Merrill
Lynch, and Citigroup <C.N> both reported huge losses for their
fourth quarters on Friday, including billions of dollars of
writedowns from exposure to debt and real estate markets.
(Editing by Anthony Barker)
