Oil Eases After Reaching 2-Year High Near $90

Oil eased from a 26-month high near $90 on Monday as the dollar strengthened, countering support from talk of higher demand caused by cold weather in Europe and parts of the United States.


The euro fell, and the dollar rose against a basket of currencies , as the euro zone's debt problems weighed on sentiment. Oil and dollar-denominated commodities often move inversely to the dollar.

U.S. light sweet crude was last down. It was last traded around $89.03. It traded as high as $89.76, the highest intraday price since Oct. 9, 2008.

London Brent crude was also lower. It was last near $91.33.

"We've had a bit of a pullback — $90 is being a sticking point for WTI at the moment and we had a little dip because of the euro," said Rob Montefusco, a trader at Sucden Financial. "Going forward, we might get a bit of a lift and push up again."

Analysts said the cold spell in Europe and in parts of the United States should limit the downside for prices, because of greater heating demand.

"The cold weather on both sides of the Atlantic will likely prevent any meaningful declines from setting in this week," said Edward Meir, analyst at MF Global, in a report.

DTN Meteorlogix, a private forecaster, expects temperatures in the U.S. Northeast to average near to below normal over the next six to 10 days and below normal in northwest Europe.

Other analysts are calling for oil's rally to go further due to signs of a tightening market and falling inventories.

At least five banks raised their mid- or long-term price forecasts last week, citing factors such as rising demand in emerging markets, faster global economic growth and OPEC's reluctance to boost output.

For example, J.P. Morgan said on Friday oil would top $100 a barrel in the first half of 2011 and $120 before the end of 2012, predicting OPEC would be very slow to react to higher prices.

The Organization of the Petroleum Exporting Countries meets on Dec. 11. Rather than raise output to curb prices, OPEC is likely to roll over existing policy, ministers have said.