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Oil climbs to 26-month high on US blizzard

Singapore, December 27, 2010

Oil climbed to a 26-month  high on Monday as a blizzard in the US Northeast offset  uncertainty over Chinese fuel demand following a Christmas Day  interest rate hike.

US crude for February rose 33 cents to $91.84 a  barrel by 0733 GMT, after hitting an intraday high of $91.88  -- the highest since October 2008. ICE Brent crude jumped 71 cents to $94.48.

Oil prices have surged nearly 35 percent since this year's  low in May as an unusually cold winter in the United States  and Europe boosted demand and slashed inventories.

The first widespread blizzard of the season slammed the  northeastern United States, the world's top heating oil  market, canceling hundreds of flights and causing havoc as  travelers scurried to return to work after the Christmas  holiday.
'Cold weather conditions in Europe and the northeastern  United States are boosting demand for oil products and giving  a lift to the oil markets,' said Serene Lim, an oil analyst at  ANZ.

Oil's climb has sparked inflationary worries, not only in  China, but also India, South Korea and other major  fuel-importing countries.

However, Kuwait's oil minister said over the weekend that  the global economy can withstand an oil price of $100 a  barrel, while other exporters indicated Opec may decide  against increasing output through 2011 as the market was well  supplied.
Qatar's Minister Abdullah Al-Attiyah said he did not  expect Opec to increase production in 2011. Opec's next  scheduled meeting is in June.

The oil market erased earlier losses that were driven by  China's decision to raise interest rates for the second time  in just over two months as it stepped up its battle to rein in  stubbornly high inflation.

When China last raised interest rates in mid-October, oil  tumbled 4 percent. Prices quickly recovered and have since  rallied by around 15 percent.

While markets had expected a rate rise, the timing was a  surprise. Most markets recovered from early losses on  expectations the measures would do little to curb China's   appetite for industrial raw materials, energy, grains and   other agricultural products.

Rising oil prices led China to boost fuel prices by 4  percent earlier this month, but analysts believe the price hike was too modest to have a significant impact on demand.

'We remain very positive on oil. Demand has surprised to  the upside. Both non-OECD and OECD demand have rebounded very   strongly this year and it is likely that demand would remain   supportive of oil prices next year,' said Chen Xin Yi,   associate vice president at Barclays Capital in Singapore. 

'We expect an average of $91 in 2011 with prices averaging  $97 in the fourth quarter of 2011 and rising to $106 for 2012.' - Reuters




Tags: China | Oil | Crude | Blizzard |

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