* Cold weather in U.S., Europe boosts demand
* Crude up more than 30 pct from 2010 low
* Prices not affecting economic growth yet
(Updates prices, adds Russian pipeline, analysts)
By Barbara Lewis
LONDON, Dec 23 (Reuters) - Oil prices held above $90 a
barrel, close to their highest in two years on Thursday as cold
weather boosted demand and U.S. stockpiles shrank while Russian
oil pipeline supplies to Europe were partly halted.
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> was flat at $90.44 a barrel
by 1311 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 seven cents lower at $93.58.
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.
"In the (U.S. inventory) report per se there was nothing
apart from a normal seasonal draw-down," said Olivier Jakob of
Petromatrix.
"The market is currently only interested in a technical
attack of the recent highs," he said, adding prices could also
be exaggerated by thin trade over the holiday period.
Patrick Armstrong of London-based Armstrong Investment
Managers said the price could go for $100 because funds were
allocating more money to commodities to preserve the real value
of investment portfolios.
"But I don't think we're going to see scenarios for
spikes... I think we are going to see more production because
oil is above $90," he said referring to OPEC.
Core OPEC ministers were arriving in Cairo on Thursday
[] although the group has said it would hold no
formal meetings before June and was keen to see prices driven by
fundamentals rather than speculators before it raised output.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Graphic on crude oil price rally:
http://link.reuters.com/jaw43r
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Stockpiles in the world's top 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 top 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.
In Europe, Russian oil supplies to Germany and Poland were
reduced because of a fire on a pipeline running via Belarus, in
a development likely to remind markets of previous supply cuts
after pricing rows between Moscow and Minsk. []
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 <.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 James Jukwey)
