Oil hits 2-year high above $88

— The price of oil, which tumbled as the global financial turmoil worsened in late 2008, has climbed back to where it was at the beginning of the crisis, thanks to a recovering U.S. and global economy and the Federal Reserve's latest stimulus program.

Benchmark oil for December delivery was up 30 cents to $88.11 a barrel mid-afternoon Thursday in Europe after rising as high as $88.63 earlier in the session during electronic trading on the New York Mercantile Exchange. On Wednesday, crude prices added $1.09 to settle to $87.81 on Wednesday.

Analysts say oil could easily reach the $90 mark in the next few days, with $94-$95 being the next big milestone. That spells more financial pain for businesses, consumers and drivers, who were at least able to find some comfort in cheaper energy costs over the past two years of recession.

"We still have enough oil to make it through the winter and into the next economic expansion. But, the surpluses are not as large and demand is making the kind of strides forward that suggest the economy is improving faster than we dared imagine," said energy research company Cameron Hanover.

"If the economy starts to really improve, then prices are likely to gain an extra boost."

Crude prices are following gold, copper, cotton and other commodities, which are rising to record highs as investors seek safety after the Federal Reserve's decision to pour $600 billion into a bond-buying program to stimulate the U.S. economy. The Fed's program will unleash more dollars on the market, effectively devaluing the dollar.

Commodities, which are priced in dollars, tends to go up if the dollar weakens because it makes them cheaper for overseas portfolio managers who have euros, pounds or yen to spend.

Recent U.S. economic data reports have also been upbeat, which is also giving oil a boost since they suggest more consumption ahead.

U.S. commercial crude inventories fell by 3.3 million barrels to 364.9 million barrels for the week ending Nov. 5, the Energy Department said Wednesday.

The government also said gasoline inventories declined by 1.9 million barrels to 210.3 million barrels while demand over the past four weeks was up slightly, averaging 9.1 million barrels a day. That's an increase of 1.8 percent from the year earlier period.

The amount of oil in storage remains above the average for this time of year, yet the oil price is now at its highest level since October 2008, when the global financial crisis was taking hold in the wake of the bankruptcy of U.S investment bank Lehman Brothers. Oil prices have risen about 11 percent this year, while crude supplies have increased by 11.5 percent.

Oil was higher Wednesday even though the dollar was stronger as traders concluded the inventory decline was a sign of an improving economy. On Thursday the dollar fell against the euro and rose versus the yen.

"Even the firmer U.S. dollar is clearly no obstacle to higher prices at present," Commerzbank said in a research note. "The inventory report of the U.S. Department of Energy was one factor driving prices, revealing a stronger-than-expected reduction of stocks in all categories."

Commerzbank also said oil "gained additional impetus from the economic data from China."

Authorities in China said yesterday that factory output and retail sales both rose at double-digit rates in October over a year earlier.

In other Nymex trading in December contracts, heating oil fell 2 cents to $2.44 a gallon and gasoline was down 0.4 cents to $2.23 a gallon. Natural gas was down 2 cents at $4.03 per 1,000 cubic feet.

In London, Brent crude climbed 2 cents to $88.98 a barrel on the ICE Futures exchange.

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