Oil prices rise as Europe, US freeze

December 22, 2010 | 11:58
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Oil prices continued to rise Tuesday amid volatile thin trade, boosted by a weak dollar and freezing weather in Europe and the United States.

New York's main contract, light sweet crude for February, added 45 cents to $89.82.

Brent North Sea crude for delivery in February jumped to $93.43 per barrel -- the highest level since October 2008. It later stood at $93.20, up 46 cents from Monday's closing level.

Colder weather in the European continent and northeastern United States has boosted expectations for heating fuel demand ahead of the Christmas break, helping push up oil prices.

"The cold weather affecting much of Europe and the US North East is now seen by some forecasters as lasting until year end," said analysts at JPMorgan.

"While heating oil demand is undoubtedly receiving a significant boost from the lower temperatures being experienced, jet fuel demand is suffering from the widespread cancellation of flights across much of Europe."

German heating oil stocks dropped to 61 per cent of the total storage capacity in the country, they added.

The market also found support from a weaker dollar, which makes dollar-priced oil cheaper for buyers using stronger currencies. In turn, that tends to stimulate demand and prices.

The euro bounced above $1.32 on Tuesday after China expressed support for EU measures to tackle the eurozone debt crisis.

However, the euro pulled back slightly after Moody's warned of a possible ratings downgrade for Portugal.

AFP

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