Harsh winter storms across the US and Europe propelled the price of oil to its highest in two years as benchmark crude reached a peak of US$91.88 in New York.
Meanwhile, the price of Brent Crude in electronic trading in London soared to $94.52, its highest level since October last year.
Even as prices eased from those heights, analysts predicted the influence of blizzards in coming days would outweigh economic jitters to push prices higher still.
On Sunday, the north-eastern US experienced its first widespread snowstorm of the season, stoking demand for heating oil in the world's biggest regional market for the commodity.
New Yorkers were last night expecting to wake up to as much as 50cm of snow, with temperatures dropping to minus 6įC. Airlines cancelled or delayed hundreds of flights yesterday at major airports serving New York, Philadelphia and Boston. Trains between New York and Boston were also cancelled. New Jersey declared a state of emergency.
In Europe, airports scrambled to clear a backlog of flights grounded over the Christmas holiday. The BBC weather centre said this month was on course to be the coldest December in the UK since record-keeping began in 1910.
For the crude market, "the near-term catalyst is the cold weather we're seeing in the northern hemisphere", said Dr Giyas Gokkent, the chief economist for the National Bank of Abu Dhabi.
The oil market heated up despite a surprise decision by the People's Bank of China on Christmas Day to cool the economy of the world's second-biggest oil consumer by raising interest rates. But analysts were sceptical that the move would have lasting effects.
"The increase in China's inflation is mainly a result of the country's excessive monetary expansion in 2009 as a reaction to the global crisis and will hardly cause any slowdown in the Middle Kingdom's commodity demand or economic growth in 2011," JBC Energy, based in Vienna, said in a report. "Demand for commodities is expected to continue to rise strongly."
Crude has been on a rising trend since September, breaking out of the $70 to $80 per barrel range in which it had traded for most of the previous 12 months. That has given many analysts and some OPEC ministers the confidence to project triple-digit prices next year.
"The price for the next year will be always hovering around $100 to $110 per barrel. I think oil prices will break the $100 per barrel barrier in January and will be between $90 and $110 for next year," Shokri Ghanem, the chairman of Libya's National Oil Corporation, told Dow Jones.
"Prices will be driven by demand being better than expected as the world economy improves. In China and India and Brazil, consumption will increase and many oil producers are reaching their peak, so supply may go down," he said.
Mr Ghanem and the oil ministers of Iran and Venezuela have said they will welcome crude at $100 per barrel. However, Ali al Naimi, the Saudi oil minister, on Friday reiterated that his preferred price range was $70 to $80 per barrel, a level he said he felt would not impede economic recovery.
Oil supplies show little sign of shrinking in the immediate future. With prices strong, OPEC compliance with its output target has slipped to about 52 per cent from 80 per cent last February.
"The view right now from OPEC is mostly focusing on inventories and they seem high at the moment, but if prices continue to increase there will be incentive to produce more," Dr Gokkent said.
That heightens the risk of a sharp correction next spring if triple-digit crude prices slow economic growth while oil inventories remain high.
"If prices increase to $100 per barrel, the expectation is that it would be negative for global market activity," Dr Gokkent said.
Iraq, meanwhile, the only OPEC member not bound by a quota, reported yesterday that its oil production had exceeded 2.6 million barrels per day for the first time in 20 years.
"We will work on rehabilitating energy industry-related infrastructure, including oil and gas pipelines," Abdul al Luaibi, the country's new oil minister, said in Baghdad on Monday in a handover ceremony with his predecessor, Hussain al Shahristani, the new deputy prime minister for energy affairs. "We will back the foreign energy companies working in Iraq to raise output, exports and storage."