US light crude prices hit a nine-month high on Friday, propelled by worries that a cold snap in the United States would draw down crude stocks that are already at their lowest since 1975.
The February crude contract on the New York Mercantile Exchange (Nymex) rose as high as $34.40 a barrel, up 42 cents or 1.2 percent on the day and marking the highest price since March 18, 2003 just before the Iraq war.
"This level is extremely important because if we are trading over this the funds will be back in buying again," said John Brady, an oil broker with ABN Amro.
US government data this week showed crude stocks in the United States, the world's biggest oil consumer, had fallen to 269 million barrels, their lowest since 1975.
The news coincided with colder-than-normal temperatures in the north-east of the country, the world's biggest market for heating oil, raising the prospect of a further draw down in oil stocks.
Nymex February heating oil futures rose as high as 99.80 cents per gallon, the highest price since March.
Weather forecasters AccuWeather and EarthSat said the north-east region would warm up next week but then turn much colder again.
The decline in the US dollar to multiyear lows against various currencies has added incentive to buy oil, which is priced in dollars and so becomes cheaper for non-dollar investors.
"We'd be trading around $32.50 if it weren't for the dollar moves," said a London-based broker, who declined to be identified. The dollar sank about 17 percent against the euro and 10 percent against the yen in 2003 and it has weakened further this year.
As the dollar sank in 2003 oil prices rose to their highest annual average levels in more than two decades.
Opec has maintained a tight rein on production but the oil cartel's president, Purnomo Yusgiantoro of Indonesia, said on Thursday the group wanted lower prices too. "We would like to have prices a little bit down," he told Reuters in an interview on Thursday.
The group is due to meet on February 10 in Algiers to consider production policy, when it may need to cut output to prepare for a seasonal downturn in global demand that usually occurs in the second quarter.
But with oil prices so high, cutting output could prove politically difficult for the group, which has already come under fire from the United States for saying high oil prices were justified, given the weakness of the dollar.
Despite such high oil prices, US Energy Secretary Spencer Abraham said on Friday the US would continue to buy oil for its strategic reserves rather than leaving oil on the open market to try to calm prices.
"The volume is very modest and it doesn't affect the markets," he told reporters during a visit to Tokyo.
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