NEW YORK (Reuters) - Oil rose on Tuesday, approaching two-year highs set a day earlier, on expectations weekly U.S. data will show another draw in crude stockpiles as companies reduce inventories for year-end tax considerations.
Analysts polled by Reuters forecast a 2.9-million-barrel draw in U.S. crude stockpiles for the week to December 24, as tax incentives prompt firms to cut inventories.
U.S. crude stockpiles fell 19 million barrels over the previous three weeks, the largest three-week drop since 1998.
U.S. crude for February delivery settled 49 cents higher at $91.49 a barrel in light holiday trade, a day after touching $91.88, the highest crude price since October 2008.
In London, ICE Brent crude settled 53 cents higher at $94.38 a barrel.
U.S. January RBOB settled at $2.4056 a gallon, down 1.53 cents or 0.63 percent, while heating oil settled 0.77 cent higher at $2.5243 a gallon.
U.S. crude’s gains erased much of Monday’s 51-cent loss. Trading was thin, with total NYMEX crude volumes just over 183,000 contracts late in the day, well below the 30-day average of 600,000.
“I think the market is pretty quiet on volume, but, that said, this morning’s price action seems to be more reflective of a positive tone than a negative tone,” said Michael Korn, president of Skokie Energy in Princeton, New Jersey.
“I’m thinking it’s more like day traders are playing it from the long side.”
U.S. crude found early support as the dollar slipped against a basket of currencies, but then gave back some gains after U.S. economic data came in weaker than expected.
As the day wore on, however, the currency and crude markets diverged. A weaker dollar tends to support prices for commodities denominated in the greenback.
“It’s always interesting when markets diverge,” said Tim Evans, energy analyst for Citi Futures Perspective in New York, adding crude got a lift from expectations of draws in heating oil and crude stocks, rather than any economic influences.
U.S. consumer confidence unexpectedly deteriorated in December, hurt by mounting worries about the job market, according to a report released by the Conference Board. The data weighed on equities markets.
Single-family home prices fell for a fourth straight month in October, pressured by a supply glut, home foreclosures and high unemployment, the Standard & Poor’s/Case-Shiller composite index showed.
In addition to the draw in crude inventories, analysts polled by Reuters forecast a 1.5-million-barrel build in gasoline inventories and a 500,000-barrel drop in distillate stockpiles.
The weekly data will be delayed by one day due to Christmas, with the American Petroleum Institute report due on Wednesday. The U.S. Energy Information Administration’s weekly report will be issued on Thursday morning.
Oil has rallied 35 percent from lows struck in May, and is up roughly 15 percent from the end of 2009.
A rally across financial markets took hold in earnest around September, spurred by the U.S. Federal Reserve’s latest round of quantitative easing, a weakened dollar and rising demand.
“Data in recent weeks have been supportive of the stocks and commodity markets globally. The U.S. will avoid a double-dip. The Asian region including Japan looks a little bit better, with its industrial production finally showing an increase,” said David Cohen, director of Asian economic forecasting at Action Economics.
“I think a lot of people are expecting prices to turn higher towards $100 a barrel next year.”
The Organisation of Arab Petroleum Exporting Countries, some of whose members also belong to OPEC, met in Cairo at the weekend, when leading exporter Saudi Arabia reiterated its preference for a $70-$80 price range. Others said $100 would be fair and the global economy could withstand it.
Oil has also found some support from cold weather across the United States and Europe. A blizzard across the U.S. East Coast this week was viewed as mixed for markets as it bolstered heating demand but hit travel consumption by shutting airports and slowing road travel.
Reporting by Jeffrey Kerr and Matthew Robinson in New York; Robert Gibbons in Houston; Barbara Lewis in London; Seng Li Peng in Singapore; Editing by Dale Hudson
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