UPDATE 6-Oil edges up on cold, economic recovery hopes

                                
 * Cold U.S./Europe weather helps lift oil
                                
 * Euro zone fears lift dollar, limit oil rise
                                
 * Coming up: API oil data, 4:30 p.m. EST Tuesday
                                
 (Recasts, updates with settlement prices, market activity)
                                
 By Robert Gibbons
                                
 NEW YORK, Dec 6 (Reuters) - U.S. oil prices edged up a to
26-month high near $90 a barrel in choppy trading on Monday as
cold weather in Europe and expectations that strengthening
economic recovery will boost demand offset the concerns about
the euro zone debt problems that lifted the dollar.
                                
 Oil demand expectations also were supported by U.S. Federal
Reserve Chairman Ben Bernanke's remarks on CBS-TV's "60
minutes" that U.S. monetary policymakers might increase the
$600 billion in asset purchases announced at the last Fed
meeting to keep economic recovery intact. [ID:nN05271909]
                                
 The view that stronger economic recovery will accelerate
and push oil prices higher as demand picks up, along with cold
weather boosting heating fuel use, helped offset the effect of
a stronger dollar and worries about euro zone economies.
                                
 U.S. crude for January delivery <CLc1> rose 19 cents to
settle at $89.38 a barrel, the fourth straight firmer close and
the highest since crude settled at $90.06 on Oct. 7, 2008.
                                
 Monday's early $89.76 intraday peak was the highest
front-month price since Oct. 9, 2008.
                                
 Total U.S. crude trading volume was above 670,700 late on
Monday, 7.6 percent above the 30-day average.
                                
 ICE Brent crude for <LCOc1> rose only 3 cents to settle at
$91.45 a barrel.
                                
 "Although the euro came under some downside pressure,
(U.S.) futures still appeared supported by a strong Brent
market that, in turn, is reacting to cold European temperatures
and a firm gas oil trade," Jim Ritterbusch, president at
Ritterbusch & Associates, said in a note.
                                
 The euro snapped a three-day advance versus the dollar and
selling pressure was expected to continue as doubts increased
about European officials' ability to find a common approach to
ease the region's debt crisis. The dollar index <.DXY> against
a basket of currencies also strengthened. [USD/]
                                
 A weak dollar can lift dollar-denominated oil prices
because it lowers the value of dollars paid to producers and
boosts the buying power of consumers using other currencies.
                                
 COLD SNAPS, BACKWARDATION EYED
                                
 Cold weather is expected to continue to tighten energy
supply margins in Europe amid below-average temperatures. The
boosted demand for heating fuel helped push gas oil futures to
a 26-month high on Monday. [ID:nLDE6B517G] [ID:nLDE6B5214]
                                
 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 allowed Brent crude to move briefly 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 eventually make it unprofitable to
store crude and help bring down bulging stockpiles.
                                
 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.
                                
 "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]
                                
 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.
                                
 U.S. crude stockpiles are expected to have fallen last week
as refiners limited imports, according to a preliminary Reuters
survey of analysts on Monday. [ID:nN06226217]
                                
 An inventory report from the American Petroleum Institute
will be released late on Tuesday, with a report from the U.S.
Energy Information Administration due on Wednesday morning.
 (Additional reporting by Gene Ramos in New York, Alex Lawler
in London and Jennifer Tan in Singapore; Editing by Marguerita
Choy)