Kuala Lumpur: Oil prices extended gains to move closer to $90 a barrel on Monday in Asia after rallying to a 26-month high last week, fuelled by hopes of rising demand amid an unusually cold snap in Europe.
Benchmark oil rose 15 cents to $89.34 a barrel at midday Kuala Lumpur time in electronic trading on the New York Mercantile Exchange. The contract added $1.19 to settle at $89.19 on Friday, the second time in less than a month that oil has reached the level where it was in the fall of 2008.
There are widespread expectations that the price will hit $90 a barrel by year’s end and head toward $100 a barrel by next spring, when traders begin looking ahead to the summer driving season.
"There is generally rather bullish sentiment in the oil market. What is powering gains today is the momentum behind the rally on Friday and the cold weather across Europe," said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore.
The oil market defied a rebound in the dollar early on Monday, he said. A weak dollar had backed oil’s rally on Friday. Oil and other energy products are priced in dollars, which means buyers who use other currencies can get more for their money when the dollar weakens.
"The $90 level is now becoming a magnet. The bulls in the market will try to push it across $90 but the question is, can it be sustained?" Shum said, citing risks amid the shaky global economic recovery and weak fundamentals in crude markets.
The euro fell to $1.3358 against the dollar in Asian trade, from $1.3415 late Friday in New York.
In other Nymex trading in January contracts, heating oil rose 0.67 cent to $2.4941 a gallon, gasoline added 0.66 cent to $2.3587 a gallon and natural gas gained 0.68 cent to $4.417 per 1,000 cubic feet.
In London, Brent crude rose 7 cents to $91.49 a barrel on the ICE futures exchange.
