Oil near $91


Oil held near $91 a barrel on Friday as falling inventories in top fuel consumer the United States at the height of winter demand countered concern about its economy.

U.S. crude stockpiles tumbled to the lowest in nearly three years last week. Heating fuel inventories in independent storage in Europe's Amsterdam-Rotterdam-Antwerp hub also fell from the year-earlier period.

U.S. crude CLc1 rose 17 cents to $91.23 a barrel by 7:15 a.m. EST. London Brent crude LCOc1 gained 21 cents to $91.09.

Oil's slight advance came alongside gains in industrial metals such as copper as investors shrugged off the China's latest interest-rate rise. European stocks jumped and the dollar lost ground against the euro.

Trade was thin in the oil market as many participants have squared their books before the holiday period -- although analysts said the drop in volume could make for volatile prices.

Oil has retreated from a record high of $99.29 late last month on signs that a slowing U.S. economy is undermining oil demand. Supply restraint by OPEC and falling stockpiles have helped limit losses.

The record rally will continue into next year with prices averaging above $77 as tight OPEC supplies and Middle East tensions outweigh a slowing U.S. economy, a Reuters poll showed on Friday.

"There are a lot of conflicting factors for prices at these levels," said Gerard Burg of National Australia Bank in Sydney. "For sure there is no additional OPEC supply to put prices at downward levels."

A gauge of future U.S. economic activity weakened for a second straight month in November and manufacturing in the mid-Atlantic region softened, according to reports on Thursday.

Signs that weakness was spreading beyond the housing sector overshadowed a government report confirming the economy posted its fastest growth in four years during the third quarter.

Oil was also restrained by the latest in a series of forecasts calling for warmer-than-usual U.S. winter weather, which would curb demand for heating fuel in the Northeast.

Forecasters such as the International Energy Agency and producer group OPEC have lowered their projections for world oil demand growth in 2008, citing the threat of an economic slowdown.


Reuters
12/21/2007 7:09:29 AM