Oil price nears two-year high as snow sweeps New York

As snow strikes New York cold weather is fuelling a hike in oil prices as prices near a two-year high.

The price of oil is nearing a two-year high fuelled by cold weather and snow in parts of the world.

Oil is trading near its two year high as cold weather and snow flurries fuel demand for the commodity.

Weather forecaster AccuWeather warned that New York City may get as much as 20 inches of snow by tonight and temperature dropping to as low as 6 degrees celsius.

"The near term catalyst is the cold weather we're seeing in the northern hemisphere," said Giyas Gokkent, the chief economist for the National Bank of Abu Dhabi. "There is some seasonality in oil prices."

Crude prices initially came under pressure when China increased its interest rates over the weekend, fuelling fears on The People's Bank of China increased its benchmark one-year lending and deposit rates on December 25 for the second time since October.

Crude futures for February traded at US$91.52 a barrel, up 1 per cent trading on the New York Mercantile Exchange at 8am in London. The contract rose almost half a per cent to $91.88 a barrel, the highest price since October 07, 2008. Brent Crude for February delivery gained 31 cents at US$94.08 a barrel on the ICE Futures Europe exchange in London.

"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," Mr Gokkent said. "If prices increase to $100 a barrel, the expectation is that it would be negative for global market activity."