Oil prices strike new high for 2009 above $71
HOUSTON -- Oil prices surged to a new high for the year Wednesday with investors pouring money into crude markets as a hedge against inflation.
Adding to crude's advance was government data that showed an uptick in demand for gasoline, yet given how much cheaper gas is compared to last year, the recession is clearly taking a toll on consumers and businesses.
Benchmark crude for July delivery rose $1.32 to settle at $71.33 a barrel in trading on the New York Mercantile Exchange after earlier touching $71.79. It was the second time in as many days that crude hit new heights this year at the close.
As U.S. currency has lost value over the past several months, crude prices have doubled largely from the influx of cash from Wall Street. Investors have used oil and other commodities as a hedge against a weak dollar.
The most recent government reports show that investors who are not buying and selling oil for commercial purposes, such as airlines who hedge energy costs, have entered the market and are betting crude oil is going to rise.
Equity markets are rebounding on the belief that the worst of the recession is over and that has helped pull energy prices higher, said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates.
"That kind of economic optimism easily feeds into expectations that oil demand will be coming back sooner than expected," Ritterbusch said.
Crude and gasoline held in U.S. storage facilities tumbled last week, the government reported Wednesday, as Americans took to the road for the summer driving season.
Yet the country is still flush with gasoline and oil, and it's the weak dollar that has driven crude prices higher for weeks.
The Energy Department's Energy Information Administration said Tuesday 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.
The EIA also predicted consumers will be paying $2.70 for a gallon of gasoline by July before prices level off.
