Oil scales 25-month high on record China demand
LONDON (Reuters) - Oil climbed to 25-month highs above $88 a barrel on Thursday after strong industrial output boosted Chinese demand to a record high and fuel stocks in the world's top oil consumer the United States fell sharply.
U.S. crude for December rose 51 cents to $88.32 a barrel by 1040 GMT (5:40 a.m. ET), after earlier touching $88.55, its highest since October 2008. ICE Brent rose 34 cents to $89.30 a barrel after touching more than a two-year high earlier.
China's industrial production grew 13.1 percent in October from a year earlier, sending oil use in the world's second biggest consumer to a record 8.92 million barrels per day (bpd).
Crude inventories in the U.S. unexpectedly fell last week, while declines in fuel stockpiles exceeded forecasts, government data showed on Wednesday.
"There was a downwards draw in stocks in the United States and in countries like China there seems to be much better demand," said Christoper Bellew, a broker at Bache Commodities, adding, "I don't think it's the feeding frenzy we had in 2008 but we are possibly in a range between $80-$95 a barrel."
The market shrugged off a stronger dollar on Thursday and weaker equities in a sign that the market is once again focusing on its own fundamentals of supply and demand. .EU .DXY
Oil prices are on course to have risen in eight of the last nine sessions, pushing them further above a previous range of $70-$80 a barrel where they have mostly traded for a year.
"We think prices are on their way for a test of the $90 mark, at least in the Brent market," said Stefan Graber, a commodities analyst with Credit Suisse in Singapore.
Other traders and analysts also expected a breach of $90 a barrel but did not expect the rally to push prices as far as $100 a barrel.
"I think you'll probably touch $90 maybe break above it and then it should slow down and then come off a little bit," said Andrey Kryuchenkov, commodities strategist at VTB Capital.
An Energy Information Administration (EIA) government report on Wednesday showed a 3.3 million-barrel drawdown in U.S. crude inventories last week, compared with forecasts for a 1.4 million-barrel gain.
Stocks of distillates including diesel and heating oil dropped by 4.97 million barrels, led by a 16 percent gain in distillate demand over the past four weeks compared with year-ago levels.
U.S. economic growth showed more tentative signs of improving on Wednesday as jobless benefit claims hit a four-month low last week and the international trade gap narrowed in September.
(Additional reporting by Isabel Coles and Alejandro Barbajosa in Singapore; editing by Keiron Henderson)