Oil Nears $89 a Barrel As U.S. Dollar Weakens

December 9, 2010 - 8:01 AM

Singapore (AP) - Oil prices rose to near $89 a barrel Thursday in Asia as a weaker U.S. dollar made crude cheaper for investors with other currencies.

Benchmark oil for January delivery was up 55 cents to $88.83 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract lost 41 cents to settle at $88.28 on Wednesday.

Oil has hovered in the upper-$80s this week -- touching a two-year high of $90.76 on Tuesday -- as traders mull how much global crude demand may grow in 2011. In the absence of any strong catalyst from oil market or economic data, crude prices often follow currency and stock markets.

The euro rose to $1.3308 on Thursday from $1.3261 late Wednesday while the dollar dropped to 83.70 yen from 84.00 yen.

Some analysts expect surging crude consumption in Asia and other emerging economies to continue to boost global demand next year. Global oil consumption rose to a record 86.7 million barrels a day in the third quarter and will likely jump to 88.1 million in 2011, according to energy consultant Wood Mackenzie.

About 85 percent of this year's global demand growth of 2.5 million barrels a day will come from developing countries, which will probably also account for 80 percent of demand growth next year and 2012, Wood Mackenzie said.

"The global market for oil is diverging as never before," Wood Mackenzie analyst Francis Osborne said. "While the economy in the mature OECD regions continues to struggle, and with it oil demand, in the emerging markets it has generally been full speed ahead on both fronts."

"Leading this recovery is China and the rest of Asia."

In other Nymex trading in January contracts, heating oil rose 1.4 cents to $2.48 a gallon, gasoline futures gained 2 cents to $2.33 a gallon and natural gas was steady at $4.62 per 1,000 cubic feet.

In London, Brent crude rose 25 cents to $91.02 a barrel on the ICE Futures exchange.