Oil prices climb above $91, cold snap supports
Singapore, December 28, 2010
US crude prices rose above $91 a barrel, hovering just below a 26-month top hit in the previous session, supported by a weaker dollar and hopes that a major snow storm on the US East Coast would stoke demand for heating oil.
Prices were also getting a lift from Opec's resistance to pumping more crude through 2011 as the market was well supplied and comments by Kuwait's oil minister that the global economy could withstand an oil price of $100 a barrel.
US crude for February was up 4 cents at $91.05 a barrel at 0403 GMT, after hitting a peak of $91.88 in the previous session -- the highest since October 2008. ICE Brent crude traded 13 cents lower at $93.72 a barrel.
'Data in recent weeks have been supportive of the stocks and commodity markets globally. The US will avoid a double-dip. The Asian region including Japan looks a little bit better, with its industrial production finally showing an increase,' said David Cohen, director of Asian Economic Forecasting at Action Economics.
'I think a lot of people are expecting prices to turn higher towards $100 a barrel next year.”
Japanese factory output rose for the first time in six months in November and manufacturers are expected to boost production in coming months, suggesting that firm demand in Asia will help the economy resume a recovery early next year.
Strong fundamentals have overshadowed the latest hike in interest rates from China, the world's second-largest consumer of oil.
'Everyone is watching China, which has to continue tightening interest rates. But I do not think the higher interest rates would derail the substantial momentum that continues in the Chinese economy,' said Cohen.
China's central bank raised interest rates on Saturday for the second time in just over two months as it stepped up its battle to rein in stubbornly high inflation.
Separately, the dollar came under pressure, hitting a three-week low against the yen and a seven-low against the Australia dollar while the euro also spiked against the dollar.
A weaker greenback supports dollar-denominated commodities such as oil, making it cheaper for those holding other currencies.
Cold snap supports
A large winter snowstorm hit the northeast United States, burying cities in knee-deep snow, leaving thousands to camp at airports and snarling traffic with blowing snow and icy roads at the end of the busy Christmas weekend.
But the snowstorm did not affect refineries' operations.
Nonetheless, the cold is expected to keep demand for heating oil firm in the short-haul, thereby supporting oil prices.
Speculators have piled back into the market as fundamentals improved. Money managers extended their net long crude oil positions to a fresh record high on the New York Mercantile Exchange in the week to Dec. 21 as crude prices edged higher, the Commodity Futures Trading Commission said on Monday. – Reuters