Oil prices trade near two-year highs

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Oil prices traded close to recent two-year highs on Thursday, as traders continued to absorb news that US crude reserves fell by more than double market expectations last week.

Brent North Sea crude for delivery in February rose eight cents to 93.73 dollars per barrel after soaring on Wednesday to 93.94 dollars -- a level last seen in early October 2008.

New York's main contract, light sweet crude for February, gained 10 cents to 90.58 dollars on Thursday, after touching a similar peak of 90.80 dollars the previous day.

The market spiked higher on Wednesday following news of plunging US crude reserves as demand in the world's biggest oil-consuming nation rises.

Investor sentiment was also spurred by cold weather, which increases demand for heating fuel, and a modest increase in US gross domestic product (GDP) data.

"Oil prices were higher again (on Wednesday) as several factors -- including cold weather in the US, a large decline in crude stocks and higher revised third-quarter US GDP -- contributed to strength in the market," said Westhouse Securities analyst David Hart.

US crude stocks dived 5.3 million barrels in the week to December 17, more than double market expectations for a drop of 2.3 million barrels, reflecting strengthening demand in the world's biggest economy.

Gasoline (petrol) reserves rose 2.4 million barrels, much more than market expectations for a gain of 900,000 barrels.

Officials on Wednesday revised up the rate of US economic growth in the third quarter to 2.6 percent from a previous estimate of 2.5 percent, pointing to an improving US recovery.

The news cheered crude markets as a pick-up in the battered American economy would spark greater demand for energy.

Crude prices rose "following the stronger than expected US GDP figures and a sharper-than-forecast 5.3 million barrel slide in US crude oil inventories," the Commonwealth Bank of Australia (CBA) said in a report.


© 2010 AFP

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