* China interest rate hike limits gains
* World economy can withstand $100 oil price-Kuwait
(Recasts, adds comments, updates prices)
By Randy Fabi
SINGAPORE, Dec 27 (Reuters) - Oil climbed to a 26-month
high on Monday as a blizzard in the U.S. Northeast offset
uncertainty over Chinese fuel demand following a Christmas Day
interest rate hike.
U.S. crude for February <CLc1> rose 33 cents to $91.84 a
barrel by 0733 GMT, after hitting an intraday high of $91.88
-- the highest since October 2008. ICE Brent crude <LCOc1>
jumped 71 cents to $94.48.
Oil prices have surged nearly 35 percent since this year's
low in May as an unusually cold winter in the United States
and Europe boosted demand and slashed inventories.
The first widespread blizzard of the season slammed the
northeastern United States, the world's top heating oil
market, canceling hundreds of flights and causing havoc as
travelers scurried to return to work after the Christmas
holiday.[]
"Cold weather conditions in Europe and the northeastern
United States are boosting demand for oil products and giving
a lift to the oil markets," said Serene Lim, an oil analyst at
ANZ.
Oil's climb has sparked inflationary worries, not only in
China, but also India, South Korea and other major
fuel-importing countries.
However, Kuwait's oil minister said over the weekend that
the global economy can withstand an oil price of $100 a
barrel, while other exporters indicated OPEC may decide
against increasing output through 2011 as the market was well
supplied. []
Qatar's Minister Abdullah al-Attiyah said he did not
expect OPEC to increase production in 2011. OPEC's next
scheduled meeting is in June.
CHINA DEMAND
The oil market erased earlier losses that were driven by
China's decision to raise interest rates for the second time
in just over two months as it stepped up its battle to rein in
stubbornly high inflation. []
When China last raised interest rates in mid-October, oil
tumbled 4 percent. Prices quickly recovered and have since
rallied by around 15 percent.
While markets had expected a rate rise, the timing was a
surprise. Most markets recovered from early losses on
expectations the measures would do little to curb China's
appetite for industrial raw materials, energy, grains and
other agricultural products.
Rising oil prices led China to boost fuel prices by 4
percent earlier this month, but analysts believe the price
hike was too modest to have a significant impact on demand.
"We remain very positive on oil. Demand has surprised to
the upside. Both non-OECD and OECD demand have rebounded very
strongly this year and it is likely that demand would remain
supportive of oil prices next year," said Chen Xin Yi,
associate vice president at Barclays Capital in Singapore.
"We expect an average of $91 in 2011 with prices averaging
$97 in the fourth quarter of 2011 and rising to $106 for 2012."
(Reporting by Randy Fabi; Editing by Manash Goswami)
