UPDATE 5-Oil slips as euro zone woes offset supportive cold

                                
 * Euro zone fears lift dollar, pull oil back from peak
                                
 * Cold U.S./Europe weather supports oil, limits losses
                                
 * Coming up: API oil data, 4:30 p.m. EST Tuesday
                                
 (Recasts, updates market activity and prices, new byline
and changes dateline, previously LONDON)  
                                
 By Robert Gibbons
                                
 NEW YORK, Dec 6 (Reuters) - U.S. oil prices eased from a
26-month high near $90 a barrel on Monday as the dollar
strengthened and countered support from higher demand caused by
cold weather in Europe and parts of the United States.
                                
 The euro fell sharply against the dollar, its first decline
in four sessions, on renewed fears the euro zone's debt
problems could spread. The dollar index <.DXY> against a basket
of currencies also strengthened. [USD/]
                                
 Cold weather in Europe and the United States and
expectations that economic recovery will accelerate and push
crude higher in 2012 demand picks up helped push oil to a
two-year peak earlier on Monday.
                                
 U.S. crude for January delivery <CLc1> fell 24 cents to
$88.95 a barrel at 12:42 p.m. EST (1742 GMT), having eased from
an earlier peak at $89.76, the highest intraday front-month
price since Oct. 9, 2008.
                                
 Total U.S. crude trading volume was above 456,000 after
midday Monday in New York, 25 percent below the 30-day
average.
                                
 ICE Brent crude for <LCOc1> fell 22 cents to $91.20 a
barrel.
                                
 "We've had a bit of a pullback -- $90 is being a sticking
point for (U.S. crude) at the moment and we had a little dip
because of the euro," said Rob Montefusco, a trader at Sucden
Financial.
                                
 Euro selling after its rebound last week was helped along
by news that IMF chief Dominique Strauss-Kahn will present a
report, a copy of which was obtained by Reuters, to euro zone
finance ministers meeting in Brussels, saying more action is
needed from member states. [ID:nLDE6B40CZ]
                                
 The dollar's strength and worries about the euro zone
economies limited the support for oil from U.S. Federal Reserve
Chairman Ben Bernanke's remarks on CBS-TV's "60 minutes" saying
it is possible U.S. monetary policymakers might increase the
$600 billion in asset purchases announced at the last Fed
meeting. [ID:nN05271909]
                                
 COLD SNAPS, BACKWARDATION EYED
                                
 The U.S. Northeast, top U.S. heating oil consuming region,
will average near to below normal temperatures over the next
six to 10 days and below normal temperatures were expected in
Northeast and Northwest Europe, according to DTN Meteorlogix, a
private forecaster. [ID:nDTN725] [ID:nDTN671]
                                
 U.S. heating demand was expected to be 16.3 percent above
normal for the week to Dec. 11, according to the U.S. National
Weather Service. Heating oil demand was forecast at 16.1
percent above normal for the same period. [ID:nN07DD]
                                
The wintry weather has allowed Brent crude to move into
backwardation -- where the front-month price is more than next
month's contract <LCO-1=R> <0#LCO:> -- and many analysts expect
the trend to strengthen. [ID:nLDE6B51VE]
                                
 Forward futures contracts for U.S. light crude <CLc1>
<0#CL:> moved into backwardation from mid-2011, although very
prompt contracts stayed at small discounts.
                                
 A smaller discount or a price premium for front-month crude
versus the near-month, could make it less profitable to store
crude and help bring down what are perceived to be bulging
stockpiles of crude oil.
                                
 U.S. crude inventories were at nearly 360 million barrels
in the week to Nov. 26, according to the government, 19.8
million barrels above the year-ago period. [EIA/S]
                                
 "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.
                                
 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. [ID:nN03126214]
                                
 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 Alex Lawler in London and Jennifer
Tan in Singapore; Editing by Marguerita Choy)