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Oil hits new 26-month high point

Oil prices hit another 26-month peak today, lifted by freezing weather and upbeat US data, before pulling lower on profit-taking before the Christmas and New Year break.

business Updated: Dec 24, 2010 18:31 IST

Oil prices hit another 26-month peak on Friday, lifted by freezing weather and upbeat US data, before pulling lower on profit-taking before the Christmas and New Year break.

At about 0430 GMT, London Brent North Sea crude for February delivery soared to 94.74 dollars per barrel -- the highest point since October 2008.

The contract later stood at 93.86 dollars, down 39 cents from Thursday's closing level.

New York's main contract, light sweet crude for delivery in February, had rallied 1.03 dollars to 91.51 on Thursday, when it struck a similar 2008 peak at 91.63. The New York Mercantile Exchange was closed on Friday.

"Today, due to a lack of economic news and with most markets closed for Christmas break, volumes will be thin and any attention will switch to potential currency movements," said Sucden analyst Myrto Sokou.

"As we are approaching the year-end, the recent rally in crude oil prices shows the underlying strength in the oil market.

"Overall, it seems that there is a strong outlook for the oil market, as crude oil prices continue strongly their upside momentum and hold strong support above the 90-dollars-per-barrel area."

This week, icy weather across Europe and northeastern US states -- which forecasters said would last until the end of the year -- lifted prices because it boosts demand for heating oil.

The market also spiked higher following Wednesday's news of plunging US crude reserves as demand in the world's biggest oil-consumer rises.

US crude stocks slumped 5.3 million barrels in the week to December 17, more than double market expectations for a drop of 2.3 million barrels, reflecting strengthening demand in the world's biggest economy.

"Cold weather in Europe has increased demand for distillate fuel, and we have seen good demand here in the US too, due to cold weather," said Andy Lipow of Lipow Oil Associates.

"World oil demand is increasing and in the short term the cold weather is contributing to that," he said.

A slew of economic data released on Thursday in the United States showed a stabilisation of jobless claims, an improvement in the housing market and a rise in consumer spending, further bolstering trade.

The market was also supported this week by impressive demand data from China.

Chinese oil consumption data for November released Tuesday came in at "a record high of 9.33 million barrels a day (mdb)," Barclays Capital said in a report.

The level was "up a phenomenal 1.145 mbd (14%) year-on-year, the strongest year-on-year growth rate since February this year," it said.

"The fourth quarter has seen an acceleration of Chinese oil demand growth once again."

The market also found support from a weaker dollar, which makes dollar-priced oil cheaper for buyers using stronger currencies. In turn, that tends to stimulate demand and prices.

First Published: Dec 24, 2010 18:28 IST