* Oil rallies as high as $89.76, fades at $90 resistance
* Cold weather in U.S., Europe offers price support
* Banks raise 2011 oil price forecasts
(Updates prices, adds comment in paragraph 12)
By Alex Lawler
LONDON, Dec 6 (Reuters) - Oil eased from a 26-month high
near $90 on Monday as the dollar strengthened, countering
support from higher demand caused by cold weather in Europe and
parts of the United States.
The euro fell, and the dollar rose against a basket of
currencies, as the euro zone's debt problems weighed on
sentiment. Oil and dollar-denominated commodities often move
inversely to the dollar.
U.S. crude <CLc1>, also known as WTI, was down 8 cents at
$89.11 by 1452 GMT. It traded as high as $89.76 earlier in the
session, the highest intraday since Oct. 9, 2008. Brent crude
<LCOc1> was up 11 cents to $91.53.
"We've had a bit of a pullback -- $90 is being a sticking
point for WTI at the moment and we had a little dip because of
the euro," said Rob Montefusco, a trader at Sucden Financial.
"Going forward, we might get a bit of a lift and push up
again."
Analysts said the cold spell in Europe and in parts of the
United States should limit the downside for prices, because of
greater heating demand.
"The cold weather on both sides of the Atlantic will likely
prevent any meaningful declines from setting in this week," said
Edward Meir, analyst at MF Global, in a report.
DTN Meteorlogix, a private forecaster, expects temperatures
in the U.S. Northeast to average near to below normal over the
next six to 10 days and below normal in northwest Europe.
U.S. heating demand this week is expected to be more than
16.3 percent above normal, the National Weather Service
forecast. []
BACKWARDATION
Oil is moving into backwardation, where prompt prices are
higher than those for delivery later.
The price structure, associated with tight supplies, could
draw in buyers, analysts said. For the forward curve of U.S.
crude click here: <0#CL:>
"This backwardation, which was rarely evident in the past
few years, is likely to bring more buyers into the arena,"
analysts at Commerzbank said in a report.
Other analysts are calling for oil's rally to go further due
to signs of a tightening market and falling inventories.
At least five banks raised their mid- or long-term price
forecasts last week, citing factors such as rising demand in
emerging markets, faster global economic growth and OPEC's
reluctance to boost output. []
For example, J.P. Morgan said on Friday oil would top $100
in the first half of 2011 and $120 before the end of 2012,
predicting OPEC would be very slow to react to higher prices.
The Organization of the Petroleum Exporting Countries meets
on Dec. 11. Rather than raise output to curb prices, OPEC is
likely to roll over existing policy, ministers have said.
(Additional reporting by Jennifer Tan in Singapore; editing by
Alison Birrane)
