Oil near $75 a barrel on economic optimism

HOUSTON -- Oil prices approached $75 a barrel Monday for the first time in 10 months amid growing optimism that the world's economies are on the mend.

Benchmark crude for October delivery rose 48 cents to settle at $74.37 a barrel on the New York Mercantile Exchange. Oil last topped $75 in October and on Monday, prices came within 19 cents of that mark.

Natural gas rebounded strongly from new seven-year lows Monday, yet still traded below $3 per 1,000 cubic feet because of a huge glut and very little demand from major industrial customers.

Expectations that demand for energy will grow were spurred Friday by Federal Reserve Chairman Ben Bernanke, who said the U.S. economy is reviving. Bernanke's remarks and signs of improvement in the U.S. housing market sent stock markets higher, and that carried over into the new week.

Even before Bernanke spoke, however, prices had already begun to rise on a large and unexpected drawdown in U.S. oil supplies last week.

"No doubt about it, we're riding the wave of a strong stock market," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "These bullish financial developments have forced a huge amount of passive capital into commodities, especially the oil space."

It's been slightly more than a year since a barrel of crude soared close to $150 a barrel. No one expects another run to those heights anytime soon, but even the prospect of increasing demand is sure to keep upward pressure on oil prices.

In a report Monday, trader and analyst Stephen Schork said once oil gets to $75, "there is not a hell of a lot to prevent it from going to $80 or $85."

Natural gas is another story. Prices are at seven-year lows and supplies continue to grow. Friday marked the 11th session out of 12 trading days in which gas prices fell.

"Demand prospects are the worst they have been in recent memory," said PFGBest Research analyst Phil Flynn.

It has been a very moderate summer and meteorologists are forecasting the same through the fall. That could drive prices down even further if people don't need as much heat for their homes.