Oil over $103 on winter demand, supply concerns

The price of oil rose 1 percent to close above $103 a barrel Wednesday, driven by severe winter weather in the U.S. and supply concerns.

Benchmark U.S. crude for March delivery rose 88 cents to $103.31 a barrel in New York, after surging $2.13 on Tuesday. The more heavily traded April contract was up 74 cents at $102.84 a barrel.

The last time the price of oil was above $103 was in October.

Also Wednesday, natural gas futures surged to a five-year high i on speculation that frigid weather forecast to extend into March will erode stockpiles already at a 10-year seasonal low.

Natural gas rose 11 percent, the biggest gain in 20 months, as forecasts show cold air will cover most of the lower 48 states from Feb. 24 through March 5. Prices have jumped 45 percent this year as waves of Arctic air boosted demand for the heating fuel, cutting stockpiles in early February to the lowest level for the time of year since 2004. The premium of March futures over April widened to a record of more than $1 as concern grew that supplies will tumble further before the cold weather ends.

Natural gas for March delivery advanced 59.8 cents to $6.149 per million British thermal units on the New York Mercantile Exchange, the highest settlement since Dec. 3, 2008.

One half of U.S. households use natural gas as their primary heating fuel and about a quarter of households in the Northeast rely on heating oil, according to the Energy Information Administration.

Meanwhile, expectations for an increase in oil supplies were dampened after Iran rejected a key demand of six world powers in their latest round of talks in Vienna aiming to finalize a deal to control Tehran’s nuclear program. Iran, a major oil producer, will be able to export more crude if the talks lead to reduced sanctions.

Protests in Venezuela, one of the top five crude suppliers to the U.S., and snags in oil production in Libya and South Sudan also helped increase prices.

In other markets, Brent crude for April, a benchmark for international oils, edged up 1 cent to $110.47 a barrel on the ICE Futures exchange in London.

On the Nymex:
— Wholesale gasoline for April slipped 0.39 cent to $2.9968 a gallon.
— Heating oil for April rose 2.7 cents to $3.0726 a gallon.

Bloomberg News contributed to this report.