Oil prices hovered near 2010 highs above $88 a barrel Friday, bolstered by hopes of growth in demand for crude and Europe’s progress in containing its debt crisis.
By early afternoon in Europe, benchmark oil for January delivery was up 12 cents to $88.12 a barrel in electronic trading on the New York Mercantile Exchange. Earlier in the session, it reached $88.33, 4 cents over its previous high for the year. On Thursday, the contract rose $1.25 to settle at $88 a barrel.
Signs the U.S. economy is gaining strength have spurred a rally on Wall Street this week, and that in turn drove oil prices up. U.S. manufacturing activity, retail sales and the housing market all improved. And while more Americans applied for unemployment benefits last week, the average over the past month fell to a two-year low.
Strong manufacturing data from China, a major crude importer, also lifted sentiment and turned attention away from European debt problems to the underlying strength of global oil demand, Barclays Capital said in a report.
«The momentum in global economic growth remains strong,» it said. «Overall, the latest U.S. data remain consistent with our view of continued steady demand increases ahead.»
Europe’s progress on containing its debt crisis added to the optimism. The European Central Bank calmed markets after saying it would extend the availability of emergency loans and offer credit at a super-low rate through the first half of next year.
The European Union agreed on bailout loans for Ireland last weekend, the second country after Greece, to help it manage high debt loads. There are fears Portugal and Spain may have to follow suit.
The ECB’s comments helped boost the euro against the dollar, making commodities like oil cheaper for non-dollar investors.
The euro was up to $1.3254 on Friday from $1.3221 late Thursday in New York, while the British pound rose to $1.5628 from $1.5584.
Analysts said the crude market will take cues from monthly U.S. unemployment figures later Friday, with the jobless rate expected to remain unchanged at 9.6 percent.
Ritterbusch and Associates foresaw rosy prospects for crude. It predicted prices could drift before hitting $90.50 a barrel in the near term. Goldman Sachs was even more sanguine, forecasting crude prices to hit an average $100 a barrel in 2011 and $110 in 2012.
In other Nymex trading in January contracts, heating oil rose 0.61 cent to $2.4607 a gallon while gasoline added 0.2 cent to $2.3573. Natural gas fell 0.7 cent to $4.336 per 1,000 cubic feet
In London, Brent crude rose 34 cents to $91.03 a barrel on the ICE futures exchange, with the cold weather in Europe helping push the contract to its highest point in two years.
Associated Press