Singapore: Oil extended gains yesterday to hold under $92 (Dh337.91) a barrel, buoyed by signs of higher demand after US crude stockpiles fell more than expected and a cold snap swept through the US Northeast, the region's largest heating oil market.
Reflecting the overall bullish sentiment, European benchmark ICE Brent crude held steady under $100 a barrel, but was off 27-month peaks hit in the previous session.
The market will scour weekly US employment data for more clues to the health of the world's largest economy. The data released so far has delivered mixed signals. While the country's unemployment rate has fallen by a hefty amount in December, far fewer workers were added than expected.
"We're seeing a very strong market in crude after four consecutive sessions of gains. There are expectations of continued growth in demand after the bigger-than-expected drop in US crude stocks," said Matthew Lewis, an analyst with CMC Markets in Sydney.
Profit taking
"It's a ‘risk-on' environment right now, where speculators are happy to see oil creeping higher. We expect the price to hit $100 in the next few weeks, but there will be strong headwinds at this level, with significant profit-taking setting in."
US crude for February delivery rose 3 cents to $91.88 a barrel by 0840 GMT, after settling up 75 cents at a 27-month high of $91.86 a barrel on Wednesday.
London Brent was up 11 cents to $98.23 a barrel, after rising 51 cents to settle at $98.12 a barrel, having touched $98.85 a barrel earlier, its highest level since October 1, 2008.
Brent's premium to US crude stood at $6.42 a barrel, its highest in 23 months since striking $10.67 a barrel in February 2009.
US oil inventories fell for the sixth straight week, slashing supplies by 2.15 million barrels in the week ending January 7, the Energy Information Administration said.
Gasoline and distillate stockpiles rose, while heating oil inventories fell as cold weather boosted demand in the US Northeast and pushed heating oil futures to 27-month highs.
Further supporting prices was the second major blizzard of the winter, which blanketed the US Northeast and cancelled thousands of flights on Wednesday.
A steady to weaker US dollar yesterday also supported dollar-priced commodities. The greenback had eased against the euro after a healthy debt auction in Portugal, which somewhat eased euro-zone fiscal worries.
Risk appetite
The euro zone's financing woes have been a drag on investors' risk appetite, though with signs that highly indebted European countries are able to tap capital markets, albeit at high borrowing costs, risk seeking may return.
Reflecting the firmer sentiment and a rise in risk appetite, the MSCI index of Asia Pacific shares outside Japan was up 0.8 per cent , within striking distance of a two-and-a-half year high that has been tested twice in the past two months.
On the supply front, worries over supply bottlenecks eased, after Alaska's key oil pipeline resumed shipments and started pumping 400,000 barrels per day, almost two-thirds of its normal levels, following a four-day shutdown due to a small leak.
In the United States, the Labour Department was to unveil first-time claims for jobless benefits for the week ended January 8 at 1330 GMT. Economists forecast a total of 405,000 new filings.
- $91.88: price of oil per barrel yesterday
- $98.23: price of London Brent yesterday
- 2.15m: barrels reduction in US inventories last week
Bullish trend
Brent crude is poised to surge beyond $100 (Dh367.30) a barrel as prices continually break out of their ranges and trade above moving averages, according to Glen Ward, head of retail derivatives at London Capital Group Holdings Plc.
Brent crude for February delivery rose as high as $98.85 a barrel on London's ICE Futures Europe exchange yesterday, the highest since October 1, 2008. Brent was up a fourth day, gaining 43 cents, or 0.4 per cent, at $98.50 as of 11.13am local time.
"I cannot see any reason why we will not see $100," said Ward. "We have positive moving averages with the price action above them all, and they are all pointing up. We are constantly seeing high peaks and higher troughs — in effect a decent bullish trend."
Prices are now above the nine-day, 14-day and 40-day moving averages, Ward said. The next "significant resistance" for Brent was at $105, which is the 61.8 per cent Fibonacci retracement from the 2008 price range at $36.20 to $147.50 a barrel, he said.
Strong technical picture
"The current supply-demand situation in Brent has put the front spread in backwardation for the first time for ages," Ward said. "The bullish picture of the physical market is backed up by a strong technical picture."
Near-term price resistance was at $98.85 and support at $97.28, London Capital said in a report yesterday. Barclays also cited Brent's break above daily price ranges and the so-called bullish momentum roll on the nine-day relative strength index as positive factors.
"We expect a test of the psychologically important $100 level and look for extension to our targets at $101.15."
