Oil rose above $90 a barrel for the first time in 26 months on Tuesday as the dollar fell and the freeze in Europe and the United States stoked fuel demand.
Temperatures in Europe’s main heating hub of the north-west were expected to stay below seasonal norms over the next 10 days, according to private forecaster DTN Meteorlogix, boosting gas oil demand and prompting utilities to switch on oil-fired power plants.
Heating demand in the United States was expected to be 16,3% above normal in the week to December 11, according to the US National Weather Service.
US crude prices for January were on track to rise for the fifth consecutive day and were up $1,04 cents at $90,42 a barrel.
Prices earlier touched $90,46 a barrel, the highest since October 2008.
ICE Brent rose $1,09 cents to $92,54 a barrel by the same time.
“The market is reacting to the very cold weather in Europe and it’s expecting to see an impact on heating oil . . . it’s a knee-jerk reaction,” said Roy Jordan, oil analyst at Facts Global Energy.
The US dollar index also fell by around 0,3% yesterday in a move that also boosted oil prices since it makes the dollar-denominated commodity more affordable for holders of other currencies.
German manufacturing orders rose in 1,6% in October, official data said, despite a fall in euro zone demand as Europe’s largest economy pulls further away from its peers.
As well as stoking demand, freezing temperatures could tighten oil market fundamentals by draining US inventories.
A preliminary Reuters poll of analysts showed that US crude oil stockpiles fell 1,5 million barrels last week and that distillates used for heating dropped
400 000 barrels.
The American Petroleum Institute will publish industry data on inventories late Tuesday, which will be followed by government statistics from the Energy Information Administration on Wednesday.
The Organisation of the Petroleum Exporting Countries meets on December 11.
Rather than raise output to curb prices, Opec is likely to roll over existing policy, ministers have said.