Oil prices hovered near $87 a barrel Thursday, after a sharp rally the day before was powered by strong economic data from the U.S. and China.
By early afternoon in Europe, benchmark oil for January delivery was down 10 cents to $86.65 a barrel in electronic trading on the New York Mercantile Exchange. The contract surged $2.64 percent, or 3.1 percent, to settle at $86.75 on Wednesday.
Improved manufacturing activity in the U.S. and China, job gains among small U.S. businesses and higher U.S. work force productivity revived confidence in the global economic recovery, giving a lift to oil.
"We are maintaining a bullish trading posture in anticipation of a further crude price advance to the $90 area. But, at the same time, additional price advances could prove erratic and one more dip toward the $85 area could be forthcoming before this market is ready to make another run," Ritterbusch and Associates said in a report.
Oil has been trading between $81 and a two-year high of just above $88 a barrel in the past month.
Goldman Sachs ( GS - news - people ) predicted prices could breach the $100 level next year amid strong growth in demand. It said world oil demand, which expanded at a higher-than-expected 2.4 million barrels a day this year, was likely to be sustained at over 2 million barrels a day over the next two years.
