Oil price rises above $75, hits new high for 2009

OIL PRICE: Oil reached a new high for 2009 on Wednesday. (Getty Images)

Oil surged for a fifth day on Wednesday to a 2009 high above $75 a barrel, boosted by a weak dollar and optimism about a global economic rebound that will lead to higher energy demand.

The dollar, which fell to its lowest in more than a year against a basket of other currencies, also boosted gold, which hit a record. Dollar weakness makes oil and bullion more affordable for non-dollar holders.

"There's a lot of positive sentiment right now, but that's largely driven by the softer dollar," said Mark Pervan, senior commodity strategist at ANZ Bank in Melbourne.

"Whether the rally is sustainable depends on further dollar weakness. If there is, we could head towards the $75 to $80 range, but $75 would be a key resistance level."

US crude jumped 95 cents to $75.10 a barrel by 5.54pm UAE time, after climbing to $75.32, the highest this year, earlier in the session. Brent crude rose 67 cents to $73.07.

Oil has more than doubled from below $33 in December driven in part by hopes of economic recovery, a rally that some in the industry argued had run ahead of weak oil demand, high inventories and abundant supply.

Now, there is more acceptance that oil use is growing.

"The market is increasingly recognizing that oil demand is indeed recovering," said Mike Wittner at Societe Generale. "That's based on two things - stabilisation in US demand and strong growth in Chinese demand.

"But it's a bit of a stretch to say that slowly improving fundamentals have caused oil prices to go up by $5 in the past week. The dollar-inflation story has been a part of that."

Asian and European data on Wednesday supported a more optimistic view of the economy.

Chinese trade figures provided fresh evidence of recovery in the world's second-largest oil user, while oil data showed strong year-on-year growth in China's oil imports in September.

And Euro zone industrial output accelerated month-on-month in August, while July production was revised upwards, providing evidence the area's economy is likely to have started growing in the third quarter.

Producer group OPEC on Tuesday became the latest forecaster to bump up global oil demand estimates.

Earnings are due from a number of major US firms this week, and the oil market is tracking results for signs of economic rebound.

JPMorgan Chase & Co reported a sharp rise in third-quarter results as underwriting revenue at its investment bank offset deeper losses on credit cards and other consumer loans.

Cold weather in the United States has also supported prices. Heating demand will be higher than normal this week, the National Weather Service said on Monday.

US inventory data from the American Petroleum Institute is due later in the session. A Reuters poll forecasts a 700,000-barrel rise in crude stocks.

Analysts who use past price moves to predict future direction said a further rally would depend on U.S. crude, also known as WTI, closing above $75 resistance.

"The advance in WTI is in our view purely technical and dollar linked - hence reversals can be sharp when and if the dollar stops to fall off the cliff," said Olivier Jakob, analyst at Petromatrix. (Reuters)

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