Crude moves up to 15-month high on demand, weak dollar

Oil prices yesterday rose one per cent, hitting fresh 15-month high near $84 a barrel, supported by data showing China's crude oil imports surged by nearly 25 per cent in December and as the dollar weakened.

The prolonged cold snap in the US and Europe continued to boost demand for heating fuel, lending support to oil prices.

US crude for February delivery rose $1.12 cents to $83.87 a barrel by 1150 GMT, off an earlier peak of $83.95, the highest price since October 2008. London Brent crude gained 94 cents to $82.31.

But oil is still 43 per cent below its July 2008 high of more than $147 a barrel.

"The weak US dollar, cold weather and robust Chinese import data are all supporting oil," said Carsten Fritsch, oil analyst at Commerzbank in Frankfurt. "At the moment the market is only looking at positive data, not negative numbers."

China, the world's second-largest energy consumer, imported over 20 million tonnes of crude for the first time ever in December, up almost a quarter from November, according to Customs data.

Asian equities yesterday rose to a 17-month high as a strong rebound in China's exports raised optimism about the region's economic outlook, while the dollar fell 0.53 per cent against a basket of currencies.

A weaker US currency makes commodities priced against the dollar, like oil, cheaper for those holding other currencies.

Tensions in Nigeria's main oil producing region have removed some supplies from the market, supporting prices, and traders will be watching carefully for further developments.

Chevron said on Saturday it had been forced to shut down 20,000 barrels per day (bpd) of crude oil production in Nigeria, a day after security sources said gunmen had attacked a pipeline operated by the US firm.

Saudi Arabia, the world's top oil exporter, will keep crude supply to major Asian and European buyers largely steady in February, as the kingdom sticks to Opec supply cuts, industry players said.

Futures have risen in 11 of the past 12 sessions as freezing temperatures in the US, Europe and Asia boosted heating fuel demand. More cold weather is forecast for China in the next two days.

The cold snap "has done its part in eating away at the distillates stockpiles, but really it's the industrial demand that the market is going to be focusing on," said Toby Hassall, commodity analyst at CWA Global Markets in Sydney.

US stockpiles of distillates such as heating oil fell for a fourth week even as imports and refinery output increased, an Energy Department report on January 6 showed. Inventories including heating oil and diesel were at 159 million barrels in the week ended January 1, the lowest since July.

Negotiations between Russia and Belarus broke down because of disputes over customs duties and the re-export of refined oil products from Belarus, Russian Energy Ministry spokeswoman Irina Yesipova said.

The countries had planned to sign an agreement on supplies before January 1.

US retail sales expanded 0.5 per cent in December, based on the median forecast from 57 economists surveyed by Bloomberg before a January 14 Commerce Department report. Industrial production probably rose 0.6 per cent, another report may show.

Exports in China, the world's fastest-growing major economy, climbed 17.7 per cent in December from a year earlier, the first increase in 14 months, the customs bureau said on its website. Imports jumped 55.9 per cent.

"Asia has obviously performed well throughout this recession," Hassall said. "Beyond the short term, the global economy, and the US in particular, the largest consumer of oil, is in the early stages of a recovery, which suggests that demand is on the mend."

The dollar dropped to a three-week low against the euro on signs Asia's economic growth is gaining pace, bolstering the investment appeal of commodities.

The US currency slid as much as one per cent to $1.4546 per euro, the weakest since December 16, from $1.4409 in New York on January 8.

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