London : Oil slipped to about $79 per barrel yesterday and was set for its first weekly drop in more than a month on disappointing economic data and expectations for reduced heating demand in the United States.

A cold snap in many parts of the northern hemisphere helped push prices above $80 (Dh293) in early January but warmer weather last week has reduced forecasts for fuel consumption, particularly in the world's biggest oil consumer, the United States.

US crude oil futures for February delivery slid 66 cents to $78.73 a barrel by 1402 GMT.

Oil, which fell every day last week, has shed about $5 from a 15-month intraday high of $83.95 on Monday, and touched a 2010 low of $78.37 on Wednesday.

The new front-month March contract for London Brent crude slid 87 cents to $77.70.

"The market is responding to rather disappointing figures from the United States, which suggest oil demand will be weaker than expected.

"US oil data points to softer fundamentals that don't justify prices around $80 per barrel," said Carsten Fritsch, anal-yst at Commerzbank.

"Colder weather was used as an argument to buy oil, but it was only a psychological factor and now that has been removed."

Gradual retreat

Edward Meir, senior commodity analyst at brokers MF Global, said his team "remains negative on the energy markets".

He forecast "a gradual retreat towards the mid to high $70s into early this week as the excessive rally generated on account of colder weather is rolled back".

Crude and fuel inventories in the United States rose last week despite unusually cold weather. Temperatures are now forecast to exceed the seasonal norm, suppressing consumption.

US demand for distillates, a fuel category which includes heating oil, was 4 per cent below year-earlier levels in the four weeks ended January 8, a government report showed on Wednesday.

The International Energy Agency said yesterday that a swathe of cold weather across major oil consuming countries had done little to boost fuel demand, slightly trimming its global oil demand growth forecast.

The Paris-based adviser to 28 industrialised economies revised its prediction for global oil demand growth in 2010 by 20,000 barrels per day (bpd) to 1.44 million bpd. It moved up its forecast for total demand this year by 10,000 bpd to 86.3 million bpd after revising the 2009 figure up.

Oil prices edged up briefly on Thursday after US regulators announced proposals to cap the size of positions dealers can hold, aiming to limit speculation.

The recommendations by the US Commodity Futures Trading Commission (CFTC) will apply to the four most-traded energy contracts on the two major exchanges, Nymex and ICE.

Analysts said the Commission had produced a set of largely workable proposals that would not inconvenience regular market users.

The CFTC said the measures would affect only the 10 biggest position holders if implemented immediately.