NEW YORK, USA

OIL prices slipped Tuesday after revving to a two-

year high as the dollar grew stronger, discouraging

some traders.

Benchmark oil for December delivery lost 34 cents to settle at US$86.72 a barrel on the New York Mercantile Exchange.

Earlier in the day, a weaker dollar helped propel oil to US$87.63 a barrel, the highest level since October 2008 when the depth of the global financial crisis took hold.

But the dollar grew stronger as the day wore on. Since commodities are priced in dollars, a stronger dollar means they become more expensive for buyers who use other currencies.

Oil and other energy prices have been climbing for weeks as traders have taken advantage of a weaker dollar stemming from the Federal Reserve’s multi-billion dollar bond-buying programme designed to revitalise the economy.

That might boost lending but the influx of dollars weakens the value of the US currency.

“While the market seems to be grinding higher, it doesn’t seem to want to back off from these new highs we keep making,” Tradition Energy analyst Gene McGillian said.

Many analysts think oil could top US$90 a barrel by the end of the year. PFGBest analyst Phil Flynn said one thing holding back a stronger rally are still-plentiful supplies of oil and gasoline and muted demand.

The International Energy Agency said has predicted global energy consumption will rise 36 per cent to 16.7 billion metric tons of oil equivalent by 2035.

China’s demand will jump 75 per cent, which will account for more than a third of increase in energy use, the IEA predicted in its annual World Energy Outlook.

The IEA report also predicted oil prices could hit US$135 a barrel and would average US$113 a barrel by 2035, compared to an average of US$60 in 2009. It said higher prices are needed to bring demand into balance with supply.

The IEA is the energy arm of the Organization for Economic Cooperation and Development, which is a group of the world’s richest nations.