Oil to end the year up 12 pct, averages near $80

Saturday, January 1, 2011


SINGAPORE:Oil was set to close the year up more than 12 percent and average nearly $80 a barrel the second highest on record driven by a resurgence in global demand, an unusually cold winter and falling inventories.

After rallying to a 26-month high of $91.88 on Monday, U.S. crude edged lower on Friday, Dec 31, with the February contract down 14 cents at $89.70 a barrel by 0642 GMT. ICE Brent crude fell 10 cents to $92.99. Oil prices were set to average $79.60 this year, second only to 2008's record average of $99.75.

U.S. crude stocks fell for the fourth straight week last week, but the drawdown was less than expected and put pressure on prices.

Crude stocks in the world's largest economy fell 1.26 million barrels to 339.43 million barrels in the week to Dec. 24, the Energy Information Agency (EIA) said.

Gasoline supplies fell by 2.32 million barrels, almost a million barrels more than expected. Some of that may have been due to companies running down stocks ahead of the year-end, but some analysts saw the fall as indicative of rising consumption as the world's largest economy continues to recover from recession.

"The latest U.S. weekly data release show a continuation of the recent strength in oil demand," said analysts at Barclays Capital in a research note.

"December is set to be the strongest month of the year in demand terms, with particularly strong indications of gasoline demand."



OPEC SUPPLIES

Even with crude stocks slipping four straight weeks and prices peaking to a 26-month high of $91.88 a barrel earlier this week, OPEC output has risen only slightly in December as Nigerian supply increased, a Reuters survey found.

Supply from the 11 OPEC members with output targets has averaged 26.75 million barrels per day (bpd) this month, up from 26.70 million bpd in November, the survey of oil companies, OPEC officials and analysts showed. [ID:nLDE6BT0QG]

Core OPEC ministers have indicated they would not provide more oil supplies to arrest oil's rally, saying $100 crude was a fair price. [ID:nLDE6BN0E6]

Oil found support from a weaker dollar and positive U.S. economic data.

The dollar languished against the Swiss franc, hitting an all-time low, and fell to a seven-week trough against the yen. The dollar index was down 0.14 percent at 79.408.

The greenback declined despite supportive jobless claims and factory data that bolstered views the U.S. economy had gained momentum at year-end and was set for a stronger performance in 2011.

The positive data could cause the U.S. Federal Reserve to curb its recent initiatives to spur economic recovery, which could strengthen the dollar and limit price boosts for dollar-denominated commodities. - Reuters

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