LONDON: Oil extended a rally above $92 a barrel on Monday, spurred by expectations economic recovery will fuel energy demand and as market bulls set their sights on $100 a barrel.
US crude was trading 70 cents higher at $92.08 a barrel by 1325 GMT, off a session high of $92.30, its highest since October 2008.
It settled at $91.38 on Friday, marking an annual gain of around 15 percent and the highest year-end price since 2007 when the market had embarked on its ascent to the all-time high of nearly $150 a barrel touched in July 2008.
Brent was up 97 cents a barrel at $95.72, off an intraday peak of $96.07, also the highest since early October 2008.
Trade was thinned by a public holiday in the United Kingdom but could take direction later on Monday from a survey by the Institute for Supply Management (ISM) — a measure of US national factory activity.
It was expected to show a slight expansion in the manufacturing sector, reinforcing the view the economy in the world’s largest oil consumer is strengthening, which could drive up energy demand.
"Traders will be looking at the string of US economic numbers coming out this week to see if they can sustain the strong price moves in December. Overall, we expect the market to be well bid. How bid? Well, it depends on the data," said Geoff Howie, markets strategist at MF Global in Singapore.
Data for Asia and Europe showed factory growth eased slightly in Asia in December, while export orders picked up in Europe.
Commodities as a whole embarked on a compelling rally in September. It continued throughout the final months of last year, driven by expectations of quantitative easing and a weakened US dollar, which tends to boost dollar-denominated commodities.
The dollar rose against a basket of currencies on Monday, partly offsetting the bullish implications for the oil market of a possible economic recovery in the United States.
The Organization of the Petroleum Exporting Countries helped to stoke bullish sentiment by saying the market was still well supplied and that it would not implement any formal change in output unless it saw a convincing shift in the balance of supply and demand.
Some analysts agreed the rally was speculative.
"It does not make sense on a fundamental basis," said Olivier Jakob of Petromatrix. "The structure of the market is telling a different story from the flat price."
US crude futures have been stuck in a stubborn contango, whereby prompt oil is cheaper than that for later delivery, a market condition that encourages storage.
Traders, however, said there was momentum to move higher as new money was expected to enter the market at the start of the year and that in the short term there was little choice but to follow it.
"The answer is to go with it or you’ll lose money," said one trader who could not be named.
Prices could still falter before the next move higher, possibly correcting to $83.85 per barrel, based on a wave pattern and a channel technique, according to Wang Tao, Reuters market analyst for commodities and energy technicals. –Additional reporting by Jennifer Tan