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Crude passes US$70, US revises predictions

CRUDE settled above US$70 a barrel yesterday for the first time this year.

Benchmark crude for July delivery rose US$1.92 to close at US$70.01 a barrel in trading on the New York Mercantile Exchange, hitting a new annual high of US$70.18 during the afternoon.

The government yesterday joined several banks that have revised their price expectations upward for the year.

The Energy Department's Energy Information Administration said yesterday in a monthly report that crude prices will likely average US$67 a barrel in the second half of 2009, about US$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 US$55.

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.

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 corporate bailouts, and that has attracted enormous sums of money to the oil markets.

The dollar, which fell further yesterday against the pound and the euro, "seems to be driving the price of oil again," said Phil Flynn, an analyst at Alaron Trading Corp.

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.

But there are signs the global economy is improving. China's passenger car sales shot up nearly 47 percent in May from a year earlier, buoyed by tax cuts and other government incentives, the China Association of Automobile Manufacturers reported yesterday.

Today'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.

These days, "it's just a market that goes up easier than it goes down," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "It's the opposite of a few months ago when oil seemed to fall on any kind of news," he said.

In other Nymex trading, gasoline for July delivery rose 3.07 cents to settle at US$1.9667 a gallon and heating oil rose 3.99 cents to settle at US$1.8076. Natural gas for July delivery settled flat at US$3.731 per 1,000 cubic feet.

In London, Brent prices gained US$1.74 to settle at US$69.62 a barrel on the ICE Futures exchange.


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