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Oil hovers near $87 in Asia on economic hopes

Oil hovers near $87 in Asia on economic hopes

December 2nd, 2010 by EILEEN NG, Associated Press in News

KUALA LUMPUR, Malaysia (AP) - Oil prices hovered near $87 a barrel Thursday in Asia after a sharp rally the day before that was powered by strong economic data from the U.S. and China.

Benchmark oil for January delivery was down 3 cents to $86.72 a barrel at late afternoon Kuala Lumpur time in electronic trading on the New York Mercantile Exchange. The contract surged $2.64 percent, or 3.1 percent, to settle at $86.75 on Wednesday.

Improved manufacturing activity in the U.S. and China, job gains among small U.S. businesses and higher U.S. work force productivity revived confidence in the global economic recovery, giving a lift to oil.

"We are maintaining a bullish trading posture in anticipation of a further crude price advance to the $90 area. But, at the same time, additional price advances could prove erratic and one more dip toward the $85 area could be forthcoming before this market is ready to make another run," Ritterbusch and Associates said in a report.

Oil has been trading between $81 and a two-year high of just above $88 a barrel in the past month.

Goldman Sachs predicted prices could breach the $100 level next year amid strong growth in demand. It said world oil demand, which expanded at a higher-than-expected 2.4 million barrels a day this year, was likely to be sustained at over 2 million barrels a day over the next two years.

Some analysts warned that economic risks, especially the European debt crisis and the possibility of further credit tightening in China, cast a shadow over such bullishness.

In other Nymex trading in January contracts, gasoline was little changed at $2.30 a gallon and heating oil fell less than 1 cent to $2.40 a gallon. Natural gas gained 3 cents to $4.30 per 1,000 cubic feet.

In London, Brent crude rose 18 cents to $89.06 a barrel on the ICE Futures exchange.