Improving economic picture bumps energy prices
Wed Aug 5 04:07:43 EST 2009
Improving economic picture bumps energy prices
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NEW YORK (AP) - Oil prices rose Tuesday and are now well above
levels just one month ago as a string of economic reports provides a
brighter outlook for the global economy.
Benchmark crude for September delivery rose 23 cents to $71.81 a
barrel on the New York Mercantile Exchange.
The housing market continued to show signs of life with pending
U.S. home sales rising in June for the fifth straight month,
according to the National Association of Realtors. The last time
there were five straight monthly gains was July 2003.
At the same time, the Commerce Department said consumers boosted
their spending 0.4 percent in June, slightly ahead of analysts'
estimates, even though personal income fell 1.3 percent, the
steepest drop in more than four years.
In what may have been the depth of the recession, energy prices
plunged as businesses and consumers slashed spending. That trend
began to ease as early as February partly because a barrel of crude
could be had for around $40, a third of the price last summer, and
partly on optimism about an economic rebound.
The weak dollar is bringing even more money into the market.
Because crude is bought and sold in dollars, it effectively becomes
cheaper when the U.S. currency falls. The dollar index hit an
11-month low this week.
That influx of optimism, and money, has helped push gasoline
prices higher for 14 straight days, a month after prices peaked for
the summer.
A barrel of oil costs almost last month at this time cost between
$63 and $65.
Energy experts continue to believe that the fundamentals of
supply and demand do not support crude prices around $70. There are
also fears that rapidly climbing prices may hinder any economic
recovery.
The chief economist of the International Energy Agency told the
Financial Times that prices higher than about $70 could slow the
recovery from the recession.
"If we go one step further, if we see prices go much higher than
that, we may see it slow down and strangle economic recovery," he
said of oil prices on Friday, when the European benchmark was around
$70.
There is still plenty of downward pressure on energy prices, and
not only because the U.S. driving season is wrapping up.
Colorado State University researcher William Gray has slightly
downgraded his forecast for the 2009 Atlantic hurricane season to 10
named storms, including four hurricanes, two of them major. In June,
his team forecast 11 named storms, including five hurricanes, two of
them major.
Prices spiked last summer when hurricanes Gustav and Ike slammed
into the nation's energy complex in the Gulf of Mexico.
The hurricane season runs until Nov. 30.
Also, the U.S. government will release its weekly report
Wednesday on crude supplies. Analysts are expecting that the amount
of crude placed in storage, with refiners pulling back on
production, will increase for the second straight week.
In other Nymex trading, gasoline for August delivery fell 1.4
cents to $2.0549 a gallon and heating oil rose 2 cents to $1.8915.
Natural gas for August delivery fell 3.1 cents to $4 per 1,000 cubic
feet.
In London, Brent prices rose 34 cents to $73.89 a barrel on the
ICE Futures exchange.
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Associated Press writers Pablo Gorondi in Budapest, Hungary, and
Alex Kennedy in Singapore contributed to this report.
AP-TK-04-08-09 1552GMT
