(Updates throughout, adds analysts' comments, updates prices)
By Santosh Menon
LONDON, Feb 22 (Reuters) - Oil rose towards $99 a barrel on
Friday, led higher by strong prices for heating fuel and
supported by rising tensions in the Middle East after thousands
of Turkish troops crossed into northern Iraq.
U.S. crude futures for April delivery <CLc1> rose 30 cents
to $98.53 a barrel by 1324 GMT, resuming its climb after sliding
on Thursday on rising U.S. crude and gasoline stockpiles.
London Brent crude <LCOc1> rose 39 cents to $96.63 a barrel.
"Gas oil cracks have strengthened and have pulled up crude
as well," said Mike Wittner, head of global oil research at
Societe Generale.
The premium of ICE gas oil futures to Brent crude
<LGO-LCO1=R>, known in the industry as cracks, rose as high as
$19.890 a barrel, the strongest level since mid-October 2005, a
sign that supply of the product is tight at a time of
intensifying cold weather.
Oil's March contract hit a record high of $101.32 on
Wednesday, taking it near its all-time inflation-adjusted high
of $102.53 hit in April 1980, boosted by a tide of investor cash
chasing commodities as a safer investment option at a time of
rising inflation and overall market turmoil.
However, prices fell on Thursday after official U.S. data
showed a sharp 4.2 million-barrel build in crude stockpiles last
week, the sixth straight week of gains and nearly double
forecasts, and gasoline stocks also rose to a 14-year high.
Analysts said the data showed U.S. consumers were struggling
with high pump prices and heightened fears of a recession in the
economy roiled by a credit crunch and a housing slump.
But continuing demand strength in China and India is likely
to keep oil well supported through any slowdown in the west, as
are threats to supplies from Africa and the Middle East.
Thousands of Turkish troops crossed into northern Iraq in
their hunt for Kurdish PKK guerrillas, a senior military source
said on Friday, in an escalation of a conflict that could
destabilise the region.
The northern part of Iraq is an oil producing region.
The surge in prices earlier this week came despite
persistent concerns about the U.S. economy, the world's top oil
consumer, and with it worries about oil demand.
Investment bank Merrill Lynch said the United States is in a
recession that could be much worse than it faced in 2001, and
closer to the sharper economic slump of the 1990s.
"With oil demand growth risks skewed to the downside in the
US we believe there is a growing risk that oil prices are now
entering overbought territory," Deutsche Bank analysts said in a
research note.
Oil has averaged $93.02 a barrel this year, up nearly a
third on the average in 2007 of $72.30.
(Additional reporting by Felicia Loo in Singapore and Ikuko Kao
in London, editing by James Jukwey)
