OIL hit a new two-year high today, heading above $US91 a barrel after economic data offered an encouraging outlook on the US economy.

Weekly US jobless claims fell by 3000 to 420,000 last week, a larger drop than expected, while new-home sales rose in November and consumer sentiment in December moved higher.

The data added to the US Department of Energy's report yesterday that oil stockpiles fell for the third consecutive week, pushing oil prices higher ahead of the Christmas holiday.

Light, sweet crude for February delivery settled up $US1.03 at $US91.51 a barrel on the New York Mercantile Exchange. It rose to $US91.63 earlier in the session, the highest price since October 2008.

Brent crude on the ICE futures exchange traded US62 cents higher at $US94.27 a barrel.

Oil trading on Nymex closed one hour earlier today, due to the Christmas holiday. Trading on the Globex electronic exchange will close at its normal time, 4.15pm in New York (8.15am AEDT).

Trading was light during the session, below 150,000 contracts as of the market close, as trading desks wrap up activities heading into the holidays and the new year. Analysts said that today's move higher could be short-lived, as low volumes can create wider swings in futures prices.

"It always gets a little dicey trying to trade ahead of the holiday," said Phyllis Nystrom, an energy analyst with Country Hedging. "You can have a small amount of interest come in and move the market."

The last two months have been anything but sluggish, with oil prices rising more than 13 per cent since mid-November. Demand from China and the US has depleted some of the excess inventories that were built up during the recession. And a weak US dollar has helped boost the price of crude by making oil cheaper for buyers in other currencies.

Over the past three weeks, US crude inventories have fallen by 19 million barrels, according to the US Department of Energy. Meanwhile, retail petrol prices have edged up toward $US3 a gallon, a level that some economists believe could start to put strains on the broader economy.

"The perception that we're going to see improving fuel-supply levels and increasing fuel demand is pushing the market higher," said Gene McGillian, a broker with Tradition Energy.

Global supplies remain high, and the Organisation of Petroleum Exporting Countries has additional spare capacity that it could produce if prices rise too quickly.

OPEC ministers at their meeting earlier this month said they were comfortable with crude prices around $US90 a barrel, however.

Several major banks expect prices to reach triple digits next year as demand rebounds with the improving global economy. And analysts say the next few trading days will be an important test for whether oil can hold above the $US90 level.


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