London: Oil prices rose on Wednesday to their highest over the past two years supported by data showing a drop in US oil and gasoline inventories, cold weather and a weaker dollar.
ICE Brent crude rose 42 cents to $93.59, its highest since October 2008. US crude for February climbed 42 cents to $90.24 a barrel by 2:45pm only the second time since 2008 it climbed above $90.
“With two days to go until Christmas Eve risk markets have ignited the afterburner, reinforcing one more time the all-pervasive mantra throughout 2010, “What crisis?”, JP Morgan analysts said in a note.
American Petroleum Institute data released late on Tuesday in the US showed a large 5.8 million barrel decline in weekly crude stocks, surpassing analyst expectations.
“Big drops in crude oil and gasoline inventories in the API data pushed the oil market to the up. But buying interest around this level, around $90 a barrel, is not so large,” said Ken Hasegawa, a commodity derivatives manager at Japan’s Newedge brokerage.
API data also showed an unexpected 2.9 million barrel fall in gasoline inventories.
The US Energy Information Service will release its inventory data at 9:00pm on Wednesday.
Oil prices were also supported by chilly weather in northern Europe and the United States, which has increased heating fuel demand. US heating oil demand was expected to average 4.6% above normal this week.
AccuWeather.com expects temperatures in the US northeast to average mostly below normal for the next week, with slightly milder readings late this month.
Thin trading volumes lent further support to oil prices.
“Ahead of the long Christmas holiday, there are relatively fewer participants. Therefore, it is possible to extend gains through the night on thin volumes, but I don’t think the market is that bullish,” Hasegawa said.
Looking beyond the New Year, Barclays Capital said it expected strong Chinese demand to continue supporting prices.
“We have a strong suspicion that upside surprises and the resultant global demand upgrades have not yet run their full course,” said Amrita Sen.
“Indeed, the persistence of strong growth and further upward revisions to Chinese oil demand could drag long-term oil demand another leg higher”.
The US dollar fell to a two-month low against the Swiss franc on Wednesday and was 0.26 percent down versus a basket of currencies.
A weaker greenback supports dollar-denominated commodities such as oil, making it cheaper for those holding other currencies.