Oil Eyes Biggest Gain this Decade

Oil steadied near $96 a barrel on Monday, heading for its biggest annual gain this decade as dwindling fuel stocks and growing concern over political turmoil offset the impact of a softening U.S. economy.

With prices starting the year at around $61, oil is now up almost 58 percent. It hit an all-time high of $99.29 on November 21 as a falling dollar and thinning inventories stoked investor interest.

Oil's rally is entering its seventh year, more than quadrupling its market value of below $20 at the start of 2002.

If prices hold, they will register their best performance for a front-month contract since 1999, when oil prices more than doubled from a $10 low.

Oil is set to average around $72.30 this year, up about 9 percent from 2006.

Political tensions have lately come back to the fore, with instability in nuclear-armed Pakistan depressing the dollar and lifting oil, and Iran's foreign minister saying the OPEC member aimed to start its first atomic power plant next year.

While oil prices have been buoyed by a slide in U.S. crude stocks to below seasonal norms, some analysts are already looking beyond the peak demand winter season.

TradingEconomics.com, Reuters
12/31/2007 7:25:33 AM