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Crude oil prices rose higher on Monday following an early drop of over US$1 a barrel.

Heavy buying in heating oil ahead of the expiration of the fuel's April contract are understood to have had a knock-on effect on the Crude oil futures contract, with WTI crude oi for May delivery up to US$106.41 a barrel by 15:36 GMT, a rise of US$0.79 compared to Friday's settlement price.

The early session losses took place partly due to speculation that a slowdown in US economic growth would also result in a lull in demand for the world's largest oil consumer. A lull in fighting in Iraq's southern city of Basra following a truce offer from Shiite cleric Moqtada al-Sadr had also eased fears of potential supply dissuptions in the region.

On Friday, the WTI contract fell 1.8% to US$105.62 on March 28 after Iraq restored exports through its Basra terminal. Prices had jumped as high as $US108.22 the previous day when an Iraqi oil pipeline that carries about 100,000 barrels a day to the Basra oil terminal was damaged by a fire started by an explosive device.Crude oil prices rose higher on Monday following an early drop of over US$1 a barrel.

U.S demand for oil is expected to remain weak over the next few months in the U.S because of the weakening economy and high oil price inflation. According to the Energy Information Administration (EIA), domestic demand for oil has dropped by 2.2 percent compared to the same period in 2007. Analysts at Goldman Sachs are predicting that benchmark oil prices will average US$91.50 three months from now.