Singapore: US crude prices rose above $91 (Dh334.2) a barrel yesterday, hovering below a 26-month top hit in the previous session.
It was 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 resistance by the Organisation of Petroleum Exporting Countries (Opec) 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 the price of oil at $100 per barrel.
US crude for February was up three cents at $91.03 a barrel at 0738 GMT, after hitting a peak of $91.88 in the previous session — the highest since October 2008. ICE Brent crude traded nine cents lower, at $93.76 per barrel.
Japanese factory output rose for the first time in six months in November and manufacturers are expected to boost production in the 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 David Cohen, director of Asian Economic Forecasting at Action Economics.
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 inflation in the country that remains stubbornly high.
Separately, the dollar came under pressure, hitting a three-week low against the yen and a seven-low against the Australian 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.
A large winter snowstorm hit the northeast United States, burying cities in knee-deep snow, leaving thousands to camp at airports. It also caused traffic snarls, 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 December 21 as crude prices edged higher, the US Commodity Futures Trading Commission said.
