Oil hits $81 on Belarus, cold weather

Oil hits $81 on Belarus, cold weather

London: Oil rose to $81a barrel on Monday, the highest in more than two months, on news that Russia has halted oil supplies to Belarus and on cold weather in the United States.

Russia has halted oil supplies to Belarussian refineries after failing to agree terms for 2010, traders said on Sunday. Russian oil was flowing normally to European Union customers via Belarus on Monday, Belarus’ state oil firm said.

The bullish news and hopes for recovery in the US economy allowed the oil market to continue the run that lifted prices by 78% last year, the biggest annual gain in a decade.

“There’s no scarcity (of oil). On the physical scale, it does not have any impact on the market, but psychologically this is very important news. Volumes are relatively thin," saud Eugen Weinberg, oil analyst at Commerzbank.

US crude for February delivery rose $1.63 to $80.99 a barrel by 1002 GMT, after touching $81.16, the highest since 26 October. Brent crude climbed $1.70 to $79.63.

Forecasts by DTN Meteorlogix for freezing temperatures across the US midwest and cold weather in the plains this week may boost heating demand and lend further support to crude prices.

Positive economic data from China and India added to the bullish sentiment.

China’s factories cranked up production in December on the back of bulging order books, while the rate of growth in Indian manufacturing rose for the first time in three months in December, surveys showed.

Investors will take further cues from US manufacturing data later on Monday and from monthly employment figures in the first week of the new year.

On the data front, the main event will be Friday’s report from the Labour Department on December US non-farm payrolls.