US blizzard pushes oil prices higher

2010-12-28 16:55

London - Oil markets edged higher on Tuesday to hover just below a more than two-year high struck the previous session after a blizzard on the US East Coast boosted demand for heating oil.

US crude for February was 30 cents higher at $91.30 a barrel by 1138 GMT. It had reached a peak of $91.88 on Monday - the highest since October 2008.

ICE Brent crude traded 9 cents higher at $93.94.

A weaker US dollar also provided support, although volumes were extremely thin across financial markets in end-of-year holiday trade.

The bulls pointed to a series of positive economic figures that could stimulate fuel demand.

"Data in recent weeks have been supportive of the stocks and commodity markets globally. The U.S. 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."

The Organization of Arab Petroleum Exporting Countries, some of whose members also belong to OPEC, met in Cairo at the weekend, when leading exporter Saudi Arabia reiterated its preference for a $70-$80 price range. Others said $100 would be fair and the global economy could withstand it.

From a low struck in May, oil has rallied by 35%, and the market is roughly 15% higher than at the end of 2009.

A rally across financial markets took hold in earnest around September, spurred by the latest waves of US quantitative easing and a weakened dollar that can support dollar-denominated commodities.

The dollar sagged against a basket of currencies on Tuesday .


For oil-consuming countries, the sustained commodities rally has raised concerns of inflation, but OPEC ministers have said a change in output policy would only be justified if there were a significant shift in fundamentals of supply and demand as opposed to a speculative price rally.

The latest data from the U.S. Commodity Futures Trading Commission on Monday showed money managers had extended their net long crude oil positions to a record high.

The latest indications of fundamentals of supply and demand for the United States, the world's biggest oil burner, will not be released until Wednesday and Thursday. Figures published last week showed a big drop in crude inventories, although they were still higher than a year ago.

Heating oil demand has been stoked in Europe and the United States by unusually cold weather.

Temperatures in the U.S. Northeast, the world's biggest heating oil market, were expected to return to near normal on Wednesday after a major snowstorm caused chaos over the first part of the week.