 HOUSTON (AP) -- Crude settled above $70 a barrel on Tuesday for the first time this year. Benchmark crude for July delivery rose $1.92 to close at $70.01 a barrel in trading on the New York Mercantile Exchange, hitting a new annual high of $70.18 during the afternoon.
On Tuesday, the government joined several banks that have revised their price expectations upward for the year. The Energy Department's Energy Information Administration said Tuesday in a monthly report that crude prices will likely average $67 a barrel in the second half of 2009, about $16 higher than the first six months of the year. A month ago, the EIA's price-per-barrel forecast for the second half of 2009 was $55.
| Then the bottom dropped out of the dollar ... |
The Energy Department also said that after falling by nearly 2 million barrels per day this year, global consumption of oil will begin to rebound in 2010 as the economy recovers.
| The economy is going to recover in 2010? Really? |
Crude prices are rising because of an influx of money from Wall Street. Investors have used oil and other commodities as a hedge against a weak dollar. The dollar has fallen in large part because of the billions the government has spent on all sorts of stuff they shouldn't be spending on corporate bailouts, and that has attracted enormous sums of money to the oil markets.
The dollar, which fell further Tuesday against the pound and the euro, "seems to be driving the price of oil again," said Phil Flynn, an analyst at Alaron Trading Corp.
| No kidding. It's like he's never seen this happen before ... |
Just how long a weak dollar can support prices like that, with the economy still in recession, is questionable. Crude in storage remains near record highs and demand in the U.S., the world's largest consumer of oil, is sluggish.
| Shows the effect of a weak dollar, doesn't it? Stocks are high, supplies are high, demand is sluggish and still oil prices go up. |
But there are signs the global economy is improving.
| Not for long if the dollar continues to tank ... |
Wednesday's release of petroleum inventory data from the Energy Information Administration could provide additional insight about crude demand. Analysts expect a rise of 800,000 barrels.
In other Nymex trading, gasoline for July delivery rose 3.07 cents to settle at $1.9667 a gallon and heating oil rose 3.99 cents to settle at $1.8076. Natural gas for July delivery settled flat at $3.731 per 1,000 cubic feet. In London, Brent prices gained $1.74 to settle at $69.62 a barrel on the ICE Futures exchange. |