NEW YORK (Reuters) - Oil jumped above $90 a barrel on Wednesday to settle at that level for the first time in 26 months as a third straight weekly drop in U.S. crude inventories and cold weather spurred pre-holiday buying.
U.S. crude stockpiles fell 5.3 million barrels last week, bringing the past three weeks’ declines to 19 million barrels, roughly equivalent to one day of U.S. fuel consumption. It marked the biggest three-week drop since 1998.
Companies have drawn down inventories for year-end accounting purposes, analysts said.
U.S. data showed the economy picked up in the third quarter, signaling a more solid pace of recovery and improving oil demand prospects.
A Reuters poll released on Wednesday showed a surge in fuel demand in the fourth quarter sent 2010 demand growth to near record levels, adding support to prices in recent weeks, with further increases expected in 2011 as the economy improves.
U.S. economic data released on Wednesday came in mixed, with gross domestic product growth revised upward to an annualized rate of 2.6 percent from 2.5 percent, below economists’ expectations and reflecting higher inventory accumulation than previously estimated.
Sales of previously owned U.S. homes rose in November, data also showed.
U.S. crude for February delivery ended up 66 cents at $90.48 a barrel, the highest settlement since October 3, 2008. It earlier touched $90.80, also the highest since October 2008.
Analysts now think U.S. crude oil’s next target is $93.05.
In London, ICE February Brent crude finished at $93.65 a barrel, gaining 45 cents and marking the highest settlement since October 1, 2008.
“With two days to go until Christmas Eve risk markets have ignited the afterburner, reinforcing one more time the all-pervasive mantra throughout 2010, ‘What crisis?,'” JP Morgan analysts said in a note.
A Reuters poll of more than 70 economists this month forecast U.S. GDP to rise 2.7 percent in 2011, up sharply from 2.3 percent in a November poll.
With 2010 demand showing the biggest gains since 2004 and expectations of a modest increase in 2011, the Organization of the Petroleum Exporting Countries could be pressured to open the taps next year, another Reuters poll showed.
The poll of 12 top oil-tracking analysts showed that oil demand this year had recovered far faster than anyone predicted early in 2010 and, while growth is expected to slow in 2011, it will still reach a new all-time high.
This year “turned out to be a year of recovery, with economic and oil demand growth clearly beating expectations”, David Wech at JBC Energy in Vienna said.
With non-OPEC supply expected to rise by only 200,000 barrels per day next year, OPEC could have to increase output by 800,000 bpd to keep pace with demand, the poll showed.
OPEC met this month and agreed to hold oil output at current levels, even as prices move to the top of the preferred range flagged by many members.
While kingpin Saudi Arabia said it favored a price range of $70 to 80 a barrel, other members, such as Kuwait, pegged $90 as a preferred top.
Ministers from the Organization of Arab Petroleum Exporting Countries, which includes OPEC members such as Saudi Arabia, Algeria and Kuwait, will meet for two days starting on Friday.
Oil found support from forecasts for cold weather in northern Europe and the United States, with U.S. heating oil demand expected to average 4.6 percent above normal this week.
“Probably what’s been the bigger factor with price has been the weather. It’s cold in Europe. It’s cold in China. And that’s pushing spot demand,” said Mark Kellstrom, an analyst at Strategic Energy Research and Capital LLC in New Jersey.
Forecaster AccuWeather.com expects temperatures in the U.S. Northeast, the world’s largest heating oil market, to average mostly below normal for the next week, with slightly milder readings late this month.
In Europe, fresh snow forecasts threatened to prolong chaos caused by a cold snap, with airlines and rail networks struggling to restore normal services.
Additional reporting by Robert Gibbons and Dave Sheppard in New York; Dmitry Zhdannikov and Alex Lawler in London; and Seng Li Peng in Singapore; Editing by Dale Hudson and Walter Bagley