Oil climbs past $68, new high for the year

imagesAssociated Press
June 1, 2009, 2:46PM

Oil prices pushed to new highs for the year today on a weak dollar and new data suggesting manufacturing in China has strengthened. Both of those factors helped send energy prices to record highs last summer.

The national average price at the pump this weekend rose above $2.50 for the first time since October.

Benchmark crude for July delivery rose $2.27 to settle at $68.58 a barrel on the New York Mercantile Exchange, the highest close since early November. Natural gas futures soared 10 percent.

The data out of China shows how much economic news from across the globe can effect pocketbooks in the U.S.

Brokerage CLSA Asia-Pacific Markets said its purchasing managers index rose to 51.2 from April’s 50.1 on a 100-point scale, indicating that the world’s third-largest economy might be recovering from a slump. Numbers above 50 show an expansion. The state-sanctioned China Federation of Logistics and Purchasing reported that its index had eased, but that manufacturing was still expanding somewhat.

When crude prices were heading toward $150 per barrel last year, many energy analysts believed the booming economies of China and India would support energy prices globally even as Western nations slipped into recession.

That did not turn out to be the case and there is little tangible evidence to suggest that the rapid rise in energy prices can be sustained for long this summer.

That would be good news for some consumers as far as energy prices go. Utility bills and gasoline prices are far below last year’s levels, though the plunge has come at the cost of millions of jobs.

Yet the pace at which energy prices rose in May has also raised questions about what is causing the surge. That is especially true of spiking natural gas prices Monday.

Natural gas has been one commodity in the energy complex that has lagged this year compared with crude and gasoline, and may finally have attracted a large number of investors who saw a bargain.

Speculative bets on crude were on the rise already. The net increase in bets that benchmark crude prices will increase rose by more than 14 percent last week, according to a report from the Commodity Futures Trading Commission.

A lot of that money is being driven by inflation fears as the dollar falls against other major currencies.

Still, there are continuing hints of an economy that may be on the mend.

The Tempe, Ariz.-based Institute for Supply Management reported the first month of growth in the new-orders index since November 2007, though the sector continues to contract overall.

Natural gas prices have slumped to five-year lows with some of the biggest users, like manufacturers, hammered by the recession.

Prices at the pump added a penny overnight to rise to $2.512, according to auto club AAA, Wright Express and Oil Price Information Service. Prices are 8.8 cents higher than a week ago and 45.1 cents higher than a month ago, but remain $1.463 below year-ago prices.

Overall demand remains very weak.

The number of miles driven collectively by Americans dropped another 3.1 billion miles in March, compared with the same time last year, the Federal Highway Administration said. That continues a trend that began more than a year ago.

The lack of broader, fundamental support hasn’t stopped momentum from building in energy markets.

“I don’t believe in it … but I’m not dumb enough to stand in front of it,” oil trader and analyst Stephen Schork said of the rally.
In other Nymex trading, gasoline for June delivery rose 2 cents to $1.915 a gallon and heating oil rose 9.89 cents to settle at $1.7765 a gallon. Natural gas for June delivery jumped 41.4 cents to settle at $4.249 per 1,000 cubic feet.

In London, Brent prices rose $2.45 to settle at $67.97 a barrel on the ICE Futures exchange

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