Cold Weather Drives Oil to Highest Price Since 2008

Oil rose to the highest price in more than two years as cold weather in the U.S. and Europe stoked demand.

U.S crude prices for January rose as high as $90.46 a barrel, the highest since Oct. 2008, Reuters reported.

Temperatures in northwest Europe are expected to stay below seasonal norms for the next 10 days, raising demand for heating oil and prompting utilities to use their oil-fired power plants.

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In the U.S., heating demand is expected to be 16.3% above normal in the week to Dec. 11, according to the U.S. National Weather Service.

"The market is reacting to the very cold weather in Europe and it's expecting to see an impact on heating oil," said Roy Jordan, oil analyst at Facts Global Energy. "It's a knee-jerk reaction."

A weakening U.S. dollar further boosted prices. The dollar index declined by 0.3%.

Freezing temperatures may drain U.S. oil inventories. A Reuters poll of analysts forecast that U.S. crude stockpiles declined by 1.5 million barrels.

Industry data on inventories will be released late Tuesday, while the Energy Information Administration is due to publish government statistics Wednesday.

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