Oil prices extended gains yesterday as threats of violence to Nigeria's oil supply and ever falling US crude stocks outweighed concerns about the economy of the world's biggest energy consumer.
US crude gained 23c at US$96.56 ($125.50) a barrel, adding to the US$1.24 rise a day earlier. LondonBrent crude rose 18c to US$95.72.
"The market has shifted its focus to the bullish factors such as the Nigerian issue and the falling inventories, for the short term at least," said Yusuke Seta of Fimat Japan.
"But I believe the upside will remain limited by the growing concerns over the weak US economy in the medium term."
Militant groups in Nigeria, the world's eighth-largest exporter, are preparing to attack oil facilities in the troubled country that has already lost 20 per cent of its output through previous assaults.
Crude oil inventories in the United States, where stockpiles have already plummeted to a three-year low, are expected to slide further, a report from the US Government is expected to show.
A Reuters poll of 14 analysts forecast that stock levels would fall by 1.3 million barrels to 288.3 million barrels for the week ended January 4, partly because of export disruptions from key supplier Mexico.
The market's bullish sentiment was further supported by news that Opec was unlikely to change oil output policy at its February 1 meeting.
"If the price stays at this level, I don't think they will do anything. Ministers will be looking at the second quarter when demand declines seasonally," a delegate said.
However, the bullish sentiment is expected to be reined in by the weakening economy in the United States.
The Energy Information Administration forecast that the economy would grow by a thin 0.3 per cent annual rate for the first quarter, after shrinking at a 0.1 per cent annual rate for the fourth quarter.
The first five days of US stock market trading this year got off to a bad start, with the Standard & Poor's 500 index down 5.32 per cent, the worst in its history, and the Dow Jones industrial average off to the worst start for a year since 1978.
