Oil crosses above $90 US

Oil prices rose above the key milestone of $90 US a barrel Tuesday before closing lower on the day as analysts predicted tighter supplies would send prices above $100 in 2011.

The gain was the first time that prices rose above the $90 level in more than two years.

Oil for January delivery closed down 69 cents at $88.69 a barrel on the New York Mercantile Exchange.

The contract earlier reached $90.76, its highest levelsince Oct. 8, 2008.

Oil prices have climbed more than $10 in the past two weeks.

Oil was Canada's most valuable commodity export in 2009, earning $42.5 billion Cdn.

Oil prices had been relatively stable for more than a year but have moved higher recently since the Federal Reserve announced plans to inject $600 billion into the economy.

Wall Street analysts suggest rising demand in China and other emerging economies will lift the price to $100 per barrel some time next year.

Morgan Stanley has predicted that spare production capacity worldwide will be cut in half in two years, falling to levels seen in 2007 and 2008.

That, it said, would once again raise tensions about supplies and the world's thirst for oil.

A price of $90 is the top of the range considered "comfortable" by the world's main oil exporters. Prices above that could crimp demand and stifle economic growth.

"This could fuel speculation that OPEC will decide on measures to dampen prices at its extraordinary meeting at the weekend, which could take the wind out of the sails of the oil price rally for a while," said a report from Commerzbank in Frankfurt.