London: Oil rose above $82 a barrel yesterday but remained below an eight-week high hit a day earlier as a spike in Chinese inflation had investors mulling prospects of monetary tightening in the heart of energy demand growth.
Expectations the Organisation of Petroleum Exporting Countries (Opec) will pump well above production targets next quarter also weighed on sentiment, but falling gasoline inventories in the United States and the first signs of a recovery in demand in 18 months supported prices.
US crude for April rose 10 cents to $82.19 a barrel by 1124 GMT, after touching $83.03 on Wednesday, the highest level since oil's 15-month high of $83.95 on January 11. London ICE April Brent rose 14 cents to $80.62 a barrel.
"While we think crude prices will test their 2010 high, they are unlikely to substantially exceed it," MF Global analyst Edward Meir said.
"Instead, a potential double-top at $83.95 should provide a technical sell signal that could bring prices back below the $80 mark."
Opec, which pumps at least one in every three barrels of oil in the world, meets in Vienna on March 17 to discuss production policy. Officials have said this week they do not expect a change in output targets while prices are within their desired range. "You are going to see $75 to $85 until Opec changes their views," said Peter McGuire, managing director of Commodity Warrants Australia in Sydney. "Given that the US dollar is appreciating, they are relatively content with what they are receiving for their oil."
The dollar edged higher against a basket of major currencies yesterday, and is up almost 8 per cent since the end of November.
A stronger dollar boosts the purchasing power of oil exporters, including Opec members. A weaker greenback usually supports oil prices as it makes dollar-denominated commodities less expensive for holders of other currencies.
Compliance
Opec has restricted output since the onset of the financial crisis in a bid to support prices. But the group's compliance with its officially targeted cut of 4.2 million barrels per day (bpd) has slipped to just 53 per cent as prices have risen.
Output from the organisation is bloating US crude inventories. They have climbed for the past six weeks, showing a 1.4-million-barrel gain to 343 million barrels in the week to March 5, the Energy Information Administration (EIA) said on Wednesday.
The nation's gasoline stockpiles showed a surprise decrease of 2.9 million barrels, the EIA said.
