Crude oil tops $70 a barrel as feds, banks raise outlook
HOUSTON -- Crude oil settled above $70 a barrel on Tuesday for the first time this year as the dollar weakened.
Crude for July delivery rose $1.92 to close at $70.01 a barrel on the New York Mercantile Exchange, hitting a high of $70.18 during the afternoon.
On Tuesday, the government joined several banks that have revised their oil 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, 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.
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 weak dollar itself also drives up the price of oil, which is traded in dollars.
Investors and speculators piling in helped drive crude oil prices to $147 a barrel a year ago.
The dollar has fallen in large part because of the billions the government has spent on corporate bailouts, and that has pushed enormous sums of money into the oil markets.
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% in May from a year earlier, buoyed by tax cuts and other government incentives, the China Association of Automobile Manufacturers reported Tuesday.
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.
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.
