Oil prices crawled up to near $71 a barrel Friday as a forecast of an increase in oil demand next year added to the effects of a weaker dollar.
By early afternoon in Europe, benchmark crude for January delivery was up 41 cents to $70.95 in electronic trading on the New York Mercantile Exchange.
On Thursday, the contract fell as low as $69.81 before settling down 13 cents at $70.54.
Global oil demand will rise slightly faster in 2010 than previously forecast, driven by increased economic activity in Asia and the Middle East, the International Energy Agency said Friday.
The Paris-based IEA, which advises oil-consuming countries, said in its monthly report that crude demand would reach 86.3 million barrels a day in 2010, up 1.7 percent from 2009. Last month, the IEA forecast oil demand of 86.2 million barrels a day in 2010.
Oil prices have fallen about 13 percent since October on investor concern U.S. crude demand isn't picking up amid the broader economic recovery. Consumption of crude distillates, which include heating oil and diesel, has fallen about 20 percent from a year earlier, Barclays Capital said in a report.
"It is really the lack of inspiration in distillate demand that stands out, showcasing the lack of cold weather and no turnaround yet in trucking activity in the U.S.," Barclays said. "Until that transpires, crude prices will remain capped on the upside."
Gains by the euro and the British pound against the dollar also supported oil prices. A weaker dollar tends to mean higher prices for oil.
The euro rose to $1.4775 in European morning trade from $1.4720 late Thursday in New York, while the British pound was up to $1.6308 from $1.6264.
In other Nymex trading in January contracts, heating oil rose 0.43 cent to $1.9072 while gasoline gained 0.16 cent to $1.8367. Natural gas fell 3.2 cents to $5.266 per 1,000 cubic feet.
In London, Brent crude for January delivery rose 41 cents to $72.27 on the ICE Futures exchange.
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