Oil prices rose to a two—year high above $90 a barrel on Tuesday due to the effects of a weaker dollar and as icy weather in Europe and the U.S. increased demand for fuel.

By early afternoon in Europe, benchmark oil for January delivery was up $1 to $90.38 a barrel in electronic trading on the New York Mercantile Exchange. The contract hit $89.76 on Monday before pulling back to settle at $89.38, up 19 cents.

Oil prices have climbed more than $10 in the past two weeks, partly due to worries that the debt crisis affecting some countries using the euro could spread.

This “shows that there is a strong upside momentum in the oil market,” supporting OPEC officials’ views that crude oil prices might reach the $100 per barrel area in 2011, said analysts at Sucden Financial in London.

If oil prices remain above $90, the top of the range considered “comfortable” by the world’s main oil exporters, it could hold back higher 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.

A weaker dollar also helped boost oil prices by making crude cheaper for investors holding other currencies.

The euro rose to $1.3363 on Tuesday from $1.3322 late Monday in New York, while the British pound was up to $1.5790 from $1.5721.

In other Nymex trading in January contracts, heating oil rose 2.66 cents to $2.5023 a gallon, gasoline added 1.45 cents to $2.3562 a gallon and natural gas gained 5.6 cents to $4.545 per 1,000 cubic feet.

In London, Brent crude advanced $1.04 to $92.49 a barrel on the ICE Futures exchange.

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