* Cold weather in U.S., Europe boosts demand
* Crude up more than 30 pct from 2010 low
* Prices not affecting economic growth yet
(Updates throughout, previous Singapore)
By Barbara Lewis
LONDON, Dec 23 (Reuters) - Oil prices held above $90 a
barrel, close to their highest in two years on Thursday, after
cold weather boosted demand and U.S. stockpiles shrank.
Unusually cold weather in the United States and Europe has
helped to spur the latest leg of a more than 30 percent rally
from a year-low struck in May.
U.S. crude for February <CLc1> eased four cents to $90.44 a
barrel by 0949 GMT, after settling at the highest level since
October 2008 on Wednesday, just off a session peak of $90.80.
ICE Brent crude <LCOc1> traded 15 cents lower at $93.50.
Wednesday's strong settlement followed U.S. inventory data
showing a big drop in crude stocks, although analysts said there
could be an element of distortion because of a year-end draw
down for tax purposes.
"The market is still trying to test resistance at the
previous high," said Olivier Jakob of Petromatrix. "In the (U.S.
inventory) report per se there was nothing apart from a normal
seasonal draw-down."
Prices could also be exaggerated by thin trade over the
end-of-year holiday period.
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Graphic on crude oil price rally:
http://link.reuters.com/jaw43r
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Stockpiles in the world's biggest oil user have fallen by 19
million barrels since Nov. 26, roughly equivalent to one day of
U.S. fuel consumption and the biggest three-week drop since
1998. []
Demand has been stoked by sub-normal temperatures, which are
expected to continue.
Forecaster AccuWeather.com expects temperatures in the U.S.
Northeast, the world's largest heating oil market, to average
mostly below normal for the next week, while U.S. heating oil
demand was expected to average 4.6 percent above normal this
week.
ECONOMIC IMPACT?
After a contraction in demand following global economic
recession, fuel use has begun to rebound and is expected to
continue growing next year taking absolute oil consumption to an
all-time high, although the rate of growth will still be lower
than a peak hit in 2004. []
The Organization of the Petroleum Exporting Countries,
however, has yet to change its output targets, which have
officially been the same since it announced a record cut in
production in December 2008.
Leading exporter Saudi Arabia has said $70-$80 is the best
range for producers and consumers, ensuring enough revenue to
generate investment in new supply while avoiding the economic
damage that could destroy demand.
Others in the group have pressed for a higher price and some
analysts consider the world could tolerate that, especially as
waves of quantitative easing have helped to weaken the dollar,
making dollar-denominated commodities, such as oil relatively
cheap, although that is partly offset by a weakened euro. <.DXY>
<EUR=>
Serene Lim, an oil analyst at ANZ, saw scope for the rally
to continue before it squeezed the economy.
"Oil prices anywhere above $110 will start to eat into
economic growth," Lim said.
(Additional reporting by Randolph Fabi and Seng Li Peng in
Singapore; editing by Sue Thomas)
