Oil prices extended gains this morning, as threats of disruptions to Nigeria's oil supply and ever falling US crude stocks outweighed concerns about the economy of the world's biggest energy consumer.
US crude rose 37 cents at $96.70 a barrel by 6.58am, adding to the $1.24 rise a day earlier. London Brent crude was up 26 cents to $95.80.
"The market has shifted its focus to the bullish factors such as the Nigerian issue and the falling inventories, for the short term at least," said Yusuke Seta of Fimat Japan.
"But I believe the upside will remain limited by the growing concerns over the weak US economy in the medium term."
Militant groups in Nigeria, the world's eighth-largest exporter, are preparing to attack oil facilities in the troubled country that has already lost 20 per cent of its output due to previous assaults.
Crude oil inventories in the United States, where stockpiles have already plummeted to a three-year low, are expected to slide further, a report from the US government due later on Wednesday is expected to show.
A Reuters poll of 14 analysts forecast that stock levels will fall by 1.3 million barrels to 288.3 million barrels for the week ended January 4th, partly due to export disruptions from key supplier Mexico.
The market's bullish sentiment was further supported by news that the Organization of the Petroleum Exporting Countries was unlikely to change oil output policy at its February 1st meeting.
"If the price stays at this level, I don't think they will do anything. Ministers will be looking at the second quarter when demand declines seasonally," a delegate said.
However, the bullish sentiment is expected to be reined in by the weakening economy in the United States.