Oil hovers below $92, near 2-year high

[January 13, 2011]  SINGAPORE (AP) -- Oil prices hovered below $92 a barrel Thursday in Asia as signs of improving U.S. demand pushed crude to a two-year high.

Benchmark oil for February delivery fell 2 cents to $91.84 a barrel midday Singapore time in electronic trading on the New York Mercantile Exchange. Crude gained 75 cents to settle at $91.86 on Wednesday, the highest settlement price since October 2008.

The Energy Department said U.S. commercial crude supplies fell by 2.2 million barrels to 333.1 million barrels last week while analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., expected a decline of only 300,000 barrels.

Crude inventories have fallen six straight weeks, suggesting U.S. consumption is strengthening.

Traders are also watching closely the restart of the 800-mile (1,287-kilometer) trans-Alaskan pipeline. Alyeska Pipeline Co., which manages the line, said about 400,000 barrels a day began flowing Wednesday, about two-thirds of the 620,000 that was delivered before a leak shut the line down Saturday.

Officials wanted to partially restart the pipeline out of concerns that ice was forming in the line and wax from the oil was accumulating during the prolonged shutdown.

However, oil continues to seep into the basement of the booster pump building near a Prudhoe Bay pump station, and a bypass pipe to circumvent the leak is still days away from being installed.

"Continued uncertainties related to the recent Alaska pipeline outage are still demanding of some risk premium in the market that is unlikely to dissipate until permanent capacity flows are resumed," Ritterbusch and Associates said in a report. "There is still a possibility of glitches as the damaged portion of the pipeline is bypassed amidst cold weather conditions."

In other Nymex trading in February contracts, heating oil was steady at $2.62 a gallon while gasoline futures held at $2.46 per gallon. February natural gas futures slid 5.2 cents to $4.48 per 1,000 cubic feet.

In London, Brent crude was up 9 cents to $98.21 a barrel on the ICE Futures exchange.

[Associated Press; By ALEX KENNEDY]

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