Oil prices end 2010 at two-year high

New York's main contract, light sweet crude for February, closed at $91.38 a barrel, up a hefty $1.54 from Thursday.

In London, Brent North Sea crude for delivery in February settled $1.66 higher at $94.75 a barrel.

The benchmark New York futures contract, which had opened lower, rallied sharply in the final minutes of trade to hit $92.06, a price unseen since early October 2008.

Brent peaked at $95.20, its highest level since the same period.

Over the course of the year, the New York contract has climbed 15 per cent and Brent soared 22 per cent.

"There is not much going on," said Andy Lipow of Lipow Oil Associates, referring to quiet markets on New Year's Eve.

"It could be a delayed reaction to the fact that the inventories have drawn yesterday and we saw the market came off, which is not what one would expect with good demand and lower inventories."

Figures released Thursday by the US Department of Energy showed crude stockpiles had fallen by much less than expected, even given the cold weather in much of the United States.

Crude stocks fell by 1.3 million barrels, much lower than the nearly three million barrel drop that market analysts were predicting.

"The market has had a day to digest that and is feeling good for the demand going forward into 2011," said Lipow. "I’m expecting that we will see $100 a barrel in 2011."

The United States is the world's biggest oil-consuming nation and the weekly stocks report is widely monitored by the market.

Crude prices this week have been boosted by the extreme cold weather and blizzards across the northern hemisphere, with households using more heating oil.

The New York oil price, which had wobbled for much of the year between $70 and $80, broke out of that band a few months ago, spurred by a weakening dollar, positive demand outlooks and the extreme winter weather in the US and Europe.