* Heating demand nearing mid-Jan peak, may recede-analysts
* Technicals show oil to fall towards $89 []
* Coming Up: API weekly oil inventory report; 2130 GMT
(Updates prices)
By Alejandro Barbajosa
SINGAPORE, Jan 4 (Reuters) - Oil hovered near the highest
price levels in more than two years, as accelerating
manufacturing activity in industrialised economies and winter
weather fanned expectations that U.S. crude inventories will
continue to drain.
U.S. crude for February <CLc1> fell 12 cents to $91.43 a
barrel at 0721 GMT, about a dollar below Monday's peak of
$92.58, the highest intraday price since early October 2008.
ICE Brent <LCOc1> was unchanged at $94.84, having topped
$96 on Monday for the first time since 2008.
"Oil sentiment has turned decidedly bullish, partly driven
by unusually cold weather, but more due to an increasingly
optimistic consensus view on 2011 economic performance,
especially for the U.S.," JPMorgan analysts led by Lawrence
Eagles said.
Prices rallied on Monday, stoked by accelerating
manufacturing activity in industrialised economies and icy
weather.
Crude oil inventories in the United States, the world's
top consumer, probably fell for the fifth-straight time last
week, down by 1.7 million barrels, a Reuters poll ahead of
weekly supply data showed on Monday.
Refiners continued to use up more of their stored crude
supplies while holding off on imports to lower their year-end
taxes, analysts said.
Industry group American Petroleum Institute (API) will
release its inventory report on Tuesday at 2130 GMT, while the
U.S. Energy Information Administration will follow with
government statistics at 1530 GMT on Wednesday.
PEAK HEATING DEMAND
Earlier on Tuesday, prices slipped as much as 27 cents on
expectations that fuel demand will ease after the approaching
peak of the Northern Hemisphere heating season.
"Increasing demand for heating oil is helping to reduce
the inventory overhang," said Credit Suisse analysts including
Stefan Graber.
"However, this is likely to be temporary as heating oil
demand usually peaks around mid-January. While the short-term
technical trend and momentum indicators remain positive, we
think that ample OPEC spare production capacity is likely to
cap the upside."
U.S. stockpiles of gasoline and distillates including
heating oil and diesel probably increased in the week ending
Dec. 31, the survey showed.
Distillate stocks were projected to have gained 300,000
barrels on average as overall demand was unchanged, the poll
showed, while gasoline inventories were also forecast to have
added 300,000 barrels.
Total U.S. heating demand this week was expected to be
only 0.5 percent above normal, the U.S. National Weather
Service said, and heating oil demand was 4.3 percent below
normal. []
MACROECONOMIC BOOST
Manufacturing in the United States and Europe accelerated
in December, while growth in China and India slowed to more
sustainable levels in another boost for the global economic
outlook. []
The deceleration in manufacturing growth in China and
India eased some concerns about possible overheating in Asia.
"We are still positive that growth in Asia will continue
with the caveat that inflationary pressures don't force
governments to undertake tightening measures beyond what the
market is expecting," Chen Xin Yi, assistant vice president at
Barclays Capital in Singapore said.
U.S. crude futures remain in a stubborn contango, a price
structure where prompt oil is cheaper than barrels for later
delivery. This market condition encourages storage.
The spread between front-month February and March crude
futures <CL-1=R> had the premium for March crude at almost $1
on Tuesday.
In other markets, Japan's Nikkei average rose to the
highest level in more than seven months on Tuesday after
global shares resumed their rally on stronger manufacturing
data the day before. Copper hit a record high in
London.[]
World stocks rallied in the first trading session of 2011
on Monday, while U.S. Treasuries prices fell as the
manufacturing numbers -- which followed positive U.S. economic
data last week -- suggested the world recovery continues to
gain momentum, encouraging investors to take on more risk.
The next big test for the U.S. economy comes on Friday
when the government will publish its December jobs report.
(Editing by Ed Lane)
