Oil climbs to new high for the year

June 1, 2009 5:30:36 AM PDT
Oil prices rose to near $68 a barrel Monday, hitting a new high for the year as world stock markets rallied and investors banked on hopes that the global recession is easing. Benchmark crude for July delivery was up $1.38 to $67.69 a barrel by late morning in Europe in electronic trading on the New York Mercantile Exchange, the highest level since early November. It had traded above $68 earlier in the day.

Oil prices have almost doubled from below $35 a barrel in March as investors have taken heart from signs a severe recession in the U.S. is slowing. Asian and Europen stock markets rose Monday as surveys showed Chinese manufacturing expanded in May and on hopes that an imminent bankruptcy announcement by General Motors Corp. will help the automaker become a leaner and healthier company.

However, global oil demand remains weak and U.S. supplies are near 19-year highs. And higher oil prices could drag on any nascent recovery.

"The market sent a clear message in May, it will ignore any and all bad news. We expect to see a correction" that will take prices back down to $40 a barrel, wrote Stephen Schork in his Schork Report.

"Of course the economy is going to turn around," Schork said. "Whether it occurs by the end of the year, beginning of next year or two years from now is anyone's guess. However, we will argue that energy has overshot the current bottoming phase," he said.

Traders will be watching for a slew of U.S. economic figures coming out this week, including May employment, April personal income and spending numbers and construction spending. Reports on the manufacturing and services sector and pending home sales in April are also due for release this week.

In other Nymex trading, gasoline for June delivery rose 2.87 cents to $1.91 a gallon and heating oil gained 3.17 cents to $1.71 a gallon. Natural gas for June delivery jumped 12.5 cents to $3.96 per 1,000 cubic feet.

In London, Brent prices rose $1.51 to $67.03 a barrel on the ICE Futures exchange.

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Associate Press writer Alex Kennedy in Singapore contributed to this report.

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