KEY POINTS:
Oil extended gains toward US$95 a barrel yesterday with traders bracing for a possible further decline in US crude stocks because of weather-related outages, although Mexican export terminals reopened after a brief halt.
US light, sweet crude for February delivery rose 50 cents to $94.63 a barrel after
gaining 82 cents on Monday.
Trading volumes remained thin, with only 1395 lots of the front-month contract trading.
London Brent crude rose 80 cents to $93.50.
US oil inventory data, to be released today, is expected to show a further 1.8 million-barrel decline in crude stocks after a dip in imports, slowed by bad weather in Texas and the Gulf.
It is also expected to show a 1.2 million-barrel draw on distillates and a 1.8 million-barrel build in petrol stocks, a preliminary Reuters poll found.
All three of Mexico's main oil-exporting ports shut on Sunday because of a storm. Two of the ports, Cayo Arcas and Coatzacoalcos, reopened on Monday while the third, Dos Bocas, reopened early on Tuesday after the two-day closure.
Mexico is one of the top three suppliers of crude oil to the US. About 80 per cent of the country's crude exports are shipped from the three ports.
Monday's gains were tempered by a US government prediction that nationwide heating demand would be about 17 per cent below normal this week and that the weather would remain mild into the first week of January.
The strengthening dollar could also check gains. The US currency hovered near a seven-week high versus the yen yesterday amid signs of a recovering risk appetite.
"We caution that the turn of the year likely brings renewed focus on weaker seasonal Q208 demand. Alongside a more sanguine view of the US dollar, we suggest the bias could quickly move to the downside," said Citi Investment analyst Doug Leggate.
Oil prices have been holding in range below last month's all-time peak of $99.29 a barrel, as dealers weigh tight inventories in the world's top consumer nations against the threat that an economic slowdown will cut consumption.
But the front-month contract on the New York Mercantile Exchange is up more than 50 per cent in nominal terms since January, the biggest gain since 2002. The price has averaged around $72 this year, up from $66.25 in 2006.
A Reuters poll showed analysts expect oil prices to average above $77 a barrel next year as tight Opec supplies and Middle East tensions outweigh concerns about a sluggish US economy.
US retailers' sales rose 3.6 per cent in holiday shopping, the lower end of expectations, helped by a late-seasons spending surge on some items, data released on Tuesday by SpendingPulse showed.
- REUTERS