Oil steady in Asia after hitting 2-year high

[November 10, 2010]  BANGKOK (AP) -- Oil prices were little changed near $87 a barrel Wednesday in Asia, consolidating gains after hitting a two-year high.

Benchmark oil for December delivery was up 1 cent $86.74 a barrel at late afternoon Bangkok time in electronic trading on the New York Mercantile Exchange. The contract lost 34 cents to settle at $86.72 a barrel on Tuesday.

A weaker dollar helped propel oil to $87.63 a barrel during trading Tuesday, the highest level since October 2008, when the global financial crisis was unfolding. The gains unwound a little later on as the dollar's weakness relented.

Since commodities are priced in dollars, a weaker dollar means they become more affordable for buyers who use other currencies.

Oil and other energy prices have been climbing for weeks as traders have taken advantage of a weaker dollar stemming from the Federal Reserve's multibillion dollar bond-buying program designed to revitalize the economy.

That might boost lending but the influx of dollars weakens the value of the U.S currency.

Many analysts think oil could top $90 a barrel by the end of the year. One thing holding back a stronger rally are still-plentiful supplies of oil and gasoline and muted demand.

The International Energy Agency said has predicted global energy consumption will rise 36 percent to 16.7 billion metric tons of oil equivalent by 2035.

China's demand will jump 75 percent, which will account for more than a third of increase in energy use, the IEA predicted in its annual World Energy Outlook.

The IEA report also predicted oil prices could hit $135 a barrel and would average $113 a barrel by 2035, compared to an average of $60 in 2009. It said higher prices are needed to bring demand into balance with supply.

In other Nymex trading in December contracts, heating oil was steady at $2.41 a gallon and gasoline added 1 cent to $2.18 a gallon. Natural gas held at $4.19 per 1,000 cubic feet.

In London, Brent crude was up 16 cents to $88.49 a barrel on the ICE Futures exchange.

[Associated Press]

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