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Oil prices rally on optimism

13 October 2009 09:06 (UTC +04:00)

BakÄ±â€“ APA-Economics. Crude prices ended 2 percent higher to its seven-week high on Monday on optimism about an imminent global economic recovery and rising fuel demand driven by cold weather.
Light, sweet crude for November delivery added 1.50 dollars, or 2 percent, to settle at 73.27 dollars a barrel on the New York Mercantile Exchange, the highest close since August 24.
In London, Brent Crude for November delivery rose 1.36 dollars to settle at 71.36 dollars a barrel on the ICE Futures exchange. The last time crude closed above 73 dollars a barrel was in late August with the U.S. driving season in full swing.
The prices got lifted after a survey released by the National Association for Business Economics on Monday showed that more than80 percent of economists believed the recession was bottoming out and an expansion has begun, although they expected the recovery would be slow.
Earlier, crude prices declined for two consecutive weeks, to 67.88 dollars per barrel.
Analysts said the prices are buoyed by improving demand prospects and sentiment, but for any sustained price hike, inventories would be needed to continue to taper off as underlying demand improve.
An International Energy Agency (IEA) report on Friday forecast a rise in demand at the end of this year and into 2010 as the global economy recovered from a slump.
The agency revised upwards its estimate for global demand this year by 200,000 barrels a day and for next year by 350,000 barrels.
Other analysts believed that oil demand in the United States, the world’s largest energy consumer, could rise due to an early blast of winter.
Further support came from a fall in the greenback, prompting fund managers to protect themselves against the fall by buying hard assets like oil and other commodities.
Traders have been looking for signs of an economic turnaround that could back fuel demand, which has been stricken hard by the recession.
The dollar has weakened against a basket of major currencies, boosting dollar-priced oil as it became cheaper for dealers holding other currencies.
The U.S. dollar index, which tracks the dollar against other major currencies, has gone down 14 percent since early March, and crude has jumped by about 20 dollars per barrel at the same time.
Meanwhile, heating oil jumped 4.16 cents to settle at 1.8944 dollars a gallon and natural gas jumped 11 cents to settle at 4.88 dollars per 1,000 cubic feet.
Economists said there is little chance of a shortage in the near term even though there are enormous supplies of all three due to the recession.
Demand for crude has plunged after the world entered its worst financial downturn since the Great Depression, with crude prices slumping from historic highs of more than 147 dollars in July 2008 to about 32 dollars in December.