London: Oil extended a rally above $92 a barrel on Monday, spurred by expectations that a global economic recovery is gathering strength and as market bulls set their sights on $100 a barrel.
US crude was trading 77 cents higher at $92.15 a barrel by 104:25 pm, just off a session high of $92.20, its highest since October 2008. It settled at $91.38 on Friday, marking an annual gain of around 15% and the highest year-end price since 2007.
Brent was up $1.20 a barrel at $95.95, off an intraday peak of $96.04, also the highest since early October 2008.
Trade was thinned by a public holiday in the United Kingdom but could take direction later on Monday from a survey by the Institute for Supply Management (ISM) -- a measure of US national factory activity.
It was expected to show a slight expansion in the manufacturing sector, reinforcing the view the economy in the world’s largest oil consumer is expanding and therefore driving up energy demand.
“Traders will be looking at the string of US economic numbers coming out this week to see if they can sustain the strong price moves in December. Overall, we expect the market to be well bid. How bid? Well, it depends on the data,” said Geoff Howie, markets strategist at MF Global in Singapore.
Commodities as a whole embarked on a compelling rally in September last year, driven by expectations of quantitative easing and a weakened US dollar, which tends to be bullish for dollar-denominated commodities.
Opec output policy unchanged
The Organization of the Petroleum Exporting Countries helped to stoke bullish sentiment by saying the market was still well supplied and that it would not implement any formal change in output unless it saw a convincing shift in the balance of supply and demand.
Some analysts agreed the rally was speculative.
“It does not make sense on a fundamental basis,” said Olivier Jakob of Petromatrix. “The structure of the market is telling a different story from the flat price.”
US crude futures have been stuck in a stubborn contango, whereby prompt oil is cheaper than that for later delivery, a market condition that encourages storage.
Traders, however, said there was momentum to move higher as new money was expected to enter the market at the start of the year and that in the short term there was little choice but to follow it.
“The answer is to go with it or you’ll lose money,” said one trader who could not be named.
Prices could still falter before the next move higher, possibly correcting to $83.85 per barrel, based on its wave pattern and a channel technique, according to Wang Tao, Reuters market analyst for commodities and energy technicals.