* Further draws seen in U.S. crude inventories
* Below average temperatures expected in near-term in U.S.
* Dollar hovers near two-month high against yen
(Updates prices, adds comment)
By Chris Baldwin
LONDON, Dec 29 (Reuters) - Oil briefly rose above $79 a
barrel to a fresh five-week high on Tuesday, supported by
expectations of colder U.S. weather and concerns over political
developments in Iran.
U.S. crude for February delivery <CLc1> rose as high as
$79.39 a barrel after U.S. home price data for October was
released showing no change from September, but then eased back
to $78.84 by 1457 GMT in thin but volatile intra-holiday trade.
Oil closed at $78.77 on Monday, its highest since Nov. 19.
London Brent crude for February <LCOc1> was up 28 cents at
$77.60.
The S&P composite prices in 20 metropolitan areas in the
United States was flat in October, which briefly sent oil
markets on a sharp rise before retracing to near flat trade that
analysts said was more in line with geopolitical events.
"Iran is clearly a hot point, because it is such a major
producer. Just remember how prices went up recently when
soldiers from Iran went into Iraq and occupied an oilfield,"
said oil analyst Christophe Barret at Calyon.
On Tuesday, tens of thousands of Iran government supporters
rallied, state media said, and a reformist party called on the
country's rulers to apologise to the nation two days after eight
people were killed in anti-government protests. []
Earlier this month, a group of Iranian troops took over an
inactive but disputed oil well in a remote region along the
Iran-Iraq border, spooking markets and pushing up the price of
crude. []
Edward Meir at MF Global wrote in a global daily report that
while the current Iranian strife is not directly impacting oil
flows, any move by the opposition towards general strikes that
include Iranian oil workers would affect markets directly.
"While we wait for events to unfold, the tensions are being
picked up by crude oil markets and reflected in the firmer
prices we are seeing," Meir said.
DOLLAR HOLDS
The dollar held firm near a two-month high against the yen
on the view that the U.S. economy is recovering well, despite
falling against the euro and other higher-yielding currencies.
[]
Oil has often eased this year as the dollar firms, making
crude more costly for holders of other currencies.
A Reuters poll of analysts showed U.S. crude inventories
likely fell 1.5 million barrels last week as refiners drew down
stocks for year-end tax issues and imports fell for what would
be the fourth straight week of declines. []
Energy Information Administration data last week showed
crude stocks fell a hefty 4.9 million barrels, following a slide
of more than 3 million barrels in the previous two government
reports.[]
Temperatures in the U.S. Northeast -- the world's largest
heating oil market -- were expected to average below normal
through Friday, private forecaster DTN Meteorlogix said.
[]
(Additional reporting by Judy Hua in Singapore, editing by Sue
Thomas)
