Oil prices were up a hair after pulling back from a new 25-month high above $88 a barrel on Thursday, as record demand in No 2 oil consumer China and an upbeat Opec consumption forecast trumped a surging dollar. Oil remained buoyant following Wednesday's data showing heavy drawdowns in crude and fuel inventories in the United States, the top oil user, that has brought back market focus on fundamentals.
At 12:30 pm EST (1730 GMT) US crude for December delivery was up 9 cents at $87.90 a barrel, after touching $88.63, the highest intraday price since October 9, 2008. The contract has risen 10 percent from the $80.56 low hit on October 29. ICE Brent rose 6 cents to $89.02, after climbing to $89.16, highest since October 3, 2008. China's industrial production grew 13.1 percent in October from a year earlier, sending oil usage in the world's second biggest consumer to a record 8.92 million barrels per day (bpd).
Chinese demand was fuelled mainly by a record refinery throughput at 8.72 million bpd, up 12.2 percent from a year earlier, as reported by the National Statistical Bureau earlier on Thursday.
The Organisation of the Petroleum Exporting Countries raised its estimate of global oil demand growth for 2011 by 120,000 barrels per day and now expects an increase of 1.17 million bpd in global oil consumption in 2011 over 2010. At the same time, the cartel raised its forecast of world oil demand next year by about 310,000 bpd to 86.95 million bpd, and increased its estimate of consumption this year by around 190,000 bpd to 85.78 million bpd. US crude stockpiles fell unexpectedly last week while refined product supplies dropped well above market forecasts, as demand improved, data from the US Energy Information Administration showed.
"There was a downwards draw in stocks in the United States and in countries like China there seems to be much better demand," said Christopher Bellew, a broker at Bache Commodities, adding, "I don't think it's the feeding frenzy we had in 2008 but we are possibly in a range between $80-$95 a barrel."
In the current market rally, US crude has broken above the year's $70-$85 range, partly on Opec's signals that it can tolerate higher oil prices and on a plan by the US Federal Reserve to buy $600 billion in Treasury bonds to help speed economic growth.
"We view short term upside price possibilities to the $90.50 level per nearby WTI crude futures as a very high probability within less than a one-week time frame," said Jim Ritterbusch, president of trading consultant Jim Ritterbusch & Associates in Galena, Illinois. Oil prices rose even though the dollar extended gains against the euro and a basket of currencies. Markets also shrugged off a dip in US equities. Usually, a stronger dollar and weaker equities drive investment flow away from commodities.
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