Singapore / London: Oil hovered near its highest price levels in more than two years on accelerating manufacturing activity in developed economies and expectations that US crude inventories will continue to be drained.
US crude for February rose 35 cents to $91.90 a barrel at on Tuesday after earlier hitting a 27-month peak of $92.58, the highest intraday price since early October 2008.
ICE Brent was up 64 cents at $95.47, having topped $96 on Monday for the first time since 2008.
“We expect oil demand to remain strong in 2011. Growth rates will slow down, but in terms of absolute levels we still expect a record year,” said Amrita Sen from Barclays Capital, adding that oil prices might hit $100 a barrel before April.
“We also expect concerns about non-Opec supplies to resurface this year,” she added. Prices had rallied on Monday on accelerating manufacturing activity in industrial economies and on icy weather.
Manufacturing in the US and Europe accelerated in December, while growth in China and India slowed to more sustainable levels in another boost for the global economic outlook.
On Tuesday, a report showed that British manufacturing activity expanded at its fastest pace in over 16 years in December, above expectations.
“It appears easily possible that the magical three-digit threshold ($100 per barrel) falls in the coming weeks,” analysts at JBC Energy broker said in a note on Tuesday.
“The wildcard of natural and man-made disasters steadily adds twists to commodity markets,” they added, citing an earthquake in Chile and floods in Columbia and Australia as contributing to a global commodities rally.
Crude oil inventories in the US, the world’s top consumer, probably fell for the fifth-straight time last week, down by 1.7 million barrels, a Reuters poll showed, while stockpiles of gasoline and distillates probably rose.
Refiners continued to use up more of their stored crude supplies while holding off on imports to lower their year-end taxes, analysts said.
“Increasing demand for heating oil is helping to reduce the inventory overhang,” said Credit Suisse analysts including Stefan Graber. “However, this is likely to be temporary.”