Oil jumps to highest levels since 2008

22nd December 2010, Comments 0 comments

World oil prices spiked to fresh two-year highs on Wednesday as traders reacted to news of plunging crude reserves in leading consumer the United States.

Brent North Sea crude for delivery in February, jumped to 93.94 dollars per barrel -- the highest level since October 2008. It later stood at 93.77 dollars, up 57 cents from Tuesday's close.

New York's main contract, light sweet crude for February, soared to a similar peak at 90.80 dollars, before pulling back to 90.47 dollars, up 65 cents.

The US Department of Energy (DoE) announced Wednesday that American crude stocks dived by 5.3 million barrels in the week to December 17.

That was more than double market expectations for a drop of 2.3 million barrels and indicated strengthening energy demand in the world's biggest economy.

Gasoline (petrol) reserves rose 2.4 million barrels, the DoE added. That was greater than market expectations for a gain of 900,000 barrels.

Prior to the news on Wednesday, oil prices were already trading at two-year peaks on the back of cold weather in the northern hemisphere, the weak dollar and bullish Chinese energy demand, analysts said.

"The prolonged cold snap in Europe and the US northeast is still supportive," said VTB Capital commodities analyst Andrey Kryuchenkov.

Icy weather across Europe and northeastern US states -- which forecasters said would last until the end of the year -- lifted prices as demand for heating oil increased.

"Oil prices remain supported on cold weather and strong demand indications, with Chinese oil demand, along with gasoline, diesel and jet fuel demand, surging to record highs in November," Barclays Capital said in a report.

Chinese oil consumption data for November released Tuesday came in at "a record high of 9.33 million barrels a day (mdb)," the Barclays Capital report stated.

The level was "up a phenomenal 1.145 mbd (14 percent) year-on-year, the strongest year-on-year growth rate since February this year," it said.

"The fourth quarter has seen an acceleration of Chinese oil demand growth once again.

"To state that Chinese oil demand has surprised to the upside this year is a no-brainer but we have a strong suspicion that upside surprises and the resultant global demand upgrades have not yet run their full course," the report added.

© 2010 AFP

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