NEW YORK, N.Y. – The price of oil has risen US$10 a barrel since early December. Now traders are questioning how much higher it can go.

Benchmark oil nearly crossed $97 for the first time in four months Wednesday morning. But by midday, it was down 31 cents to $96.37 per barrel.

One catalyst for the recent price increase has been the apparent strengthening of the global economy. That could signal increased demand for oil. China’s manufacturing sector and the U.S. housing market have shown signs of renewal, and indications are that the worst of Europe’s financial crisis is behind it.

On Wednesday Platts reported that China’s oil demand hit a record high in December, averaging about 10.6 million barrels per day, as the country’s economy strengthened and refineries processed more crude. China is the second largest energy consumer in the world behind the U.S.

Still, the global economy is far from red hot. The International Monetary Fund on Wednesday projected modest global economic growth in 2013, while warning that “there remain considerable challenges ahead.”

“The approximate 12 per cent crude advance extending back to early December has priced in a very optimistic global economic view,” cautioned Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, in a note to clients.

U.S. drivers won’t mind if oil prices level off or fall. The average price for a gallon of gas has gone up nearly 10 cents since Dec. 21. But the increase so far for January is only two cents a gallon. Last year gas prices rose an average 16 cents in the first month and kept rising until reaching a peak of $3.94 a gallon in early April.

Brent crude, used to price international varieties of oil, was up 33 cents to $112.75 per barrel on the ICE Futures exchange in London.

In other energy futures trading on Nymex:

— Natural gas fell three cents to $3.53 per 1,000 cubic feet.

— Wholesale gasoline was up a penny at $2.84 per gallon.

— Heating oil rose one cent to $3.07 a gallon.

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Pamela Sampson in Bangkok and Pablo Gorondi in Budapest contributed to this report.

(TSX:ECA, TSX:IMO, TSX:SU, TSX:HSE, NYSE:BP, NYSE:COP, NYSE:XOM, NYSE:CVX, TSX:CNQ, TSX:TLM, TSX:COS.UN, TSX:CVE)