* Crude averages $79.61 in 2010, second highest on record
* Gains expected to continue 2011 with demand growth
* Saudi Arabia seen limiting upside rise
(Updates throughout)
By Robert Gibbons and Selam Gebrekidan
HOUSTON/NEW YORK, Dec 31 (Reuters) - Oil prices hit a
26-month high over $92 a barrel on Friday, closing the year up
15 percent on expectations that the economic recovery will
drive demand growth next year and send prices into triple
digits.
Strong growth from Asia, especially China, and a rebound in
demand from recovering economies elsewhere fueled a four-month
rally that knocked crude over the $70-$80 range it held for
much of the year.
U.S. crude oil futures <CLc1> surged to a 2010 high on
Friday, settling up $1.54 a barrel at $91.38 a barrel, after
touching $92.06, the highest level since Oct. 7, 2008. The
settlement marked the largest end-year price since 2007.
London Brent <LCOc1> gained $1.66 to settle at $94.75 a
barrel, its highest end-December settlement since 2007 and up
nearly 22 percent on the year.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic of U.S. crude's yearly performance:
http://link.reuters.com/gac44r
Graphic of commodity performance in 2010:
http://r.reuters.com/ret24r
Factbox on commodity performance: []
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Global output jumped 2.2 million barrels per day (bpd),
according to a Reuters poll, the biggest increase since 2004,
and another healthy 1.5 million bpd gain is forecast for next
year. []
While many experts say oil could break $100 a barrel in the
new year, they don't expect a surge to levels near $150 seen in
2008, when crude first broke into triple digits.
The Organization of the Petroleum Exporting Countries would
step in to cool off markets if they headed into territory that
could endanger the global economic recovery, analysts
said.
"At some point, I would expect OPEC to increase
production, whether through an extra cargo here or there to
cash in on high prices or whether by a more concerted effort to
calm people down," said Tim Evans, analyst for Citi Futures
Perspective.
Recent gains in the dollar could also help cap oil's
momentum by increasing the cost of dollar-denominated
currencies for holders of other currencies.
U.S. crude averaged $79.61 a barrel for the year, second
only to 2008's record $99.75. Crude shot to a high of $147 a
barrel in July of that year, before the global recession hit
demand and sent prices below $33.
Cold weather in the United States and Europe and OPEC's
decision to keep production levels steady earlier this month
have added to bullish sentiment this month. Analysts are
watching to see how much of the recent rally has been caused by
seasonal weather demand and how much has been driven by more
structural consumption
growth.
Speculators betting the economic recovery will boost demand
have poured into oil markets, with net long positions held by
money managers in U.S. oil futures hitting fresh records in
December.
U.S. crude rallied back from early losses on Friday in
light holiday trade of about 275,000 contracts -- about half
the level seen over the past 30 days -- bouncing off lows near
$89 a barrel.
"We're seeing exaggerated price swings because of low
volume of trade but there is technical support around $89 a
barrel and the rally will continue to march into next
year," said Gene McGillian, analyst for Tradition Energy in
Stamford, Connecticut.
(Additional reporting by Jeffrey Kerr in New York, Randi Fabi
in Singapore and Dmitry Zhdannikov in London; Writing by
Matthew Robinson; Editing by Lisa Shumaker)
