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Fri 31 Dec 2010 11:14 AM

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Oil to end the year up 12 percent, averages near $80

Oil to average nearly $80 in 2010, second highest on record

Oil to end the year up 12 percent, averages near $80
OIL PRICES: Oil prices were set to average $79.60 this year, second only to 2008s record average of $99.75 (Getty Images)

Oil was set to close the year up more than 12 percent and average nearly $80
a barrel, the second highest on record, driven by resurgence in global demand,
an unusually cold winter and falling inventories.

After rallying since May to a 26-month high of $91.88 on Monday, US crude
edged lower on Friday, with the February contract down 30 cents at $89.54 a
barrel by 0345 GMT.

The smaller than expected draw down in US natural gas and crude stocks
pressured prices, offsetting upbeat economic data from the world's top oil
user. Oil prices were set to average $79.60 this year, second only to 2008's
record average of $99.75.

ICE Brent crude eased 19 cents to $92.90.

US natural gas inventories fell last week by 136 billion cubic feet (bcf) to
3.232 trillion cubic feet (tcf), the Energy Information Administration (EIA) said,
below market expectations.

"The 136 bcf net withdrawal was toward the lower end of the range of
expectations and should be a test of whether the bears can reassert control of
the market after the recent move higher," said Timothy Evans, energy
analyst at Citi Futures Perspective.

US natural gas futures traded 1.1 cents lower at $4.3 per million British
thermal units.

Crude stocks in the world's largest economy also fell less than expected,
easing by 1.26 million barrels to 339.43 million barrels in the week to December
24, the EIA said.

Gasoline supplies fell by 2.32 million barrels, while distillate stocks rose
243,000 barrels.

"The latest US weekly data release show a continuation of the recent
strength in oil demand," said analysts at Barclays Capital in a research

"December is set to be the strongest month of the year in demand terms,
with particularly strong indications of gasoline demand."

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