Oil climbs to 2-year high on frigid weather, rising

Saturday, 25 December 2010 00:01 - - {{hitsCtrl.values.hits}}

SINGAPORE (Reuters) - Oil rallied to its highest price in more than two years on Friday, supported by unusually frigid weather that has fueled demand, depleted supplies and stoked inflationary worries from South Korea to India.

European benchmark ICE Brent crude for February hit an intra-day high of $94.74 a barrel, the highest level since October 2008, before easing back to trade up 32 cents at $94.57 a barrel by 1:49 a.m. EST.

Global benchmark U.S. crude futures, which hit a 26-month high of $91.63 on Thursday, did not trade on Friday with the NYMEX floor closed for the Christmas holiday.

Brent, trading at a premium to U.S. crude, has surged partly due to a severe cold snap in continental Europe and Britain.

Snow and more frigid temperatures were predicted in parts of Europe over the weekend, threatening to prolong chaos at airlines and rail networks and further boost fuel demand.

"With the upside surprise in oil demand continuing, and the persistence of cold weather helping in rebalancing the oil market further, prices are showing some urgency to enter a new phase of dynamics," said analysts for Barclays Capital in a weekly report.

"The latest surge has brought $100 per barrel within range for Brent crude in particular.

INFLATIONARY WORRIES

Oil's more than 30 percent climb from this year's low in May has revived concerns that prices could once again impact economic growth for fuel importing countries.

South Korea's finance minister warned on Friday that the fifth-largest buyer of crude oil buyer could face inflationary pressures sparked by rising global liquidity and commodity prices next year.