* Oil turns positive on weak dollar
* Technical support seen around $89
* Oil price averaging nearly $80 in 2010
* Second highest price on record
* Commodities outperformed stocks in 2010
(Recasts, updates prices, market activity; new byline, changes
dateline, previously LONODN)
By Selam Gebrekidan
NEW YORK, Dec 31 (Reuters) - U.S. crude oil futures turned
positive, rising back above $91 a barrel on Friday as a weaker
dollar and technical support stopped a bout of year-end profit
taking.
NYMEX crude oil for February delivery <CLG1> rose $1.49, or
1.66 percent, to $91.33 a barrel at 12:15 a.m. EST (1715 GMT).
ICE Brent crude <LCOc1> rose $1.60 to $94.69 a barrel.
The U.S. dollar fell broadly as investors closed their
books on 2010 but still managed to end a volatile year a bit
firmer than where it began. []
A weaker dollar typically lifts dollar-denominated oil
prices as it lowers the value of dollars paid to producers and
pulls down oil prices in markets using other currencies.
Technical support at $89 a barrel also helped oil price
bounce back, traders said.
"The first signal for higher prices was the early firmness
in crude spreads, in particular the February and March
contracts. Even as flat prices were testing $89 this front
spread had rallied," said Michael Korn, President of Skokie
Energy in Princeton, New Jersey.
In early trade, oil tested Thursday's lows at $89.02 as
long liquidation had overrun bullish economic data and a
drawdown in crude inventories.
"This is a sudden reappraisal once the long liquidation was
done. We've had this strange situation all morning of oil being
lower even as equities and the euro were higher because of what
looked like profit taking. I guess people got out of their
positions now," said Peter Beutel, president, Cameron Hanover
in Connecticut.
"Still, this is a very quiet day and trying to read too
much into the market today would be a mistake," he added.
Crude oil was set to close the year up more than 12 percent
due to a resurgence in global demand, an unusually cold winter
for many heating oil consumers, and falling inventories.
Crude was on track to average $79.60 a barrel for the year,
second only to 2008's record average of $99.75.
Analysts said they expected strong demand for raw
materials, especially in China, to push oil even higher next
year, although the global recovery remained fragile.
U.S. crude stocks fell last week for the fourth straight
week, but the drawdown was less than expected and pressured
prices.
The fall in gasoline stocks was much bigger than expected,
supported by year-end holiday travel demand, possibly signaling
rising consumption as the world's largest economy recovers from
recession.
"The latest U.S. weekly data release show a continuation of
the recent strength in oil demand," said analysts at Barclays
Capital in a research note.
"December is set to be the strongest month of the year in
demand terms, with particularly strong indications of gasoline
demand," they added.
Including all products, the total US implied demand has
risen to the highest level of the year and above the levels of
2008, said Olivier Jakob from Petromatrix.
It was, however, soaring demand in Asia that analysts said
contributed most to healthy gains in oil and commodities in
2010. Prices in metals and soft commodities also beat records
or climbed near multi-year highs.
The Reuters-Jefferies CRB index of 19 commodities is up 16
percent on the year, a more attractive return than on stocks.
OPEC SUPPLIES
Even with crude stocks slipping for four straight weeks and
prices peaking at a 26-month high of $91.88 a barrel earlier
this week, OPEC output has risen only slightly in December as
Nigerian supply has increased, a Reuters survey found.
Core OPEC ministers have indicated they would not provide
more oil supplies to arrest the oil rally, saying $100 crude
was a fair price.
"With non-OPEC production growth expected to slow down to
some 420,000 barrels per day next year, OPEC should face the
welcomed opportunity to bring on stream substantial additional
volumes," JBC Energy said. "This is particularly true for
the second half of 2011, when we project the demand for OPEC
crude to average clearly more than 30 million barrels per
day," it added.
(Additional reporting by Jeffrey Kerr in New York, Robert
Gibbons in Houston, Randi Fabi in Singapore and Dmitry
Zhdannikov in London; Editing by David Gregorio)
