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