Oil rises to near $69 as investors weigh outlook

[June 09, 2009]  NEW YORK (AP) -- Oil prices rose to near $69 a barrel Tuesday as traders brushed off concerns that the doubling of crude prices since March is out of step with a weak global economy.

Benchmark crude for July delivery was up 67 cents to $68.76 a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange. Earlier in the session, prices hit $69.37 before falling back. On Monday, it fell 35 cents to settle at $68.09.

Oil prices have joined a surge in equity markets on investor optimism that the worst of a global recession is over. Crude touched above $70 a barrel last week, the highest since October.

However, crude inventories remain near 19-year highs and demand in the U.S., the world's largest consumer of oil, is sluggish.

"There continues to be some economic optimism out there," said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore. "Investors have brushed aside any near-term concerns about the weak oil market fundamentals."

Wednesday's release of petroleum inventory data from the Energy Department's Energy Information Administration could provide some insight about crude demand. Analysts expect a rise of 800,000 barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. Stocks unexpectedly rose last week after dropping the previous three weeks.

"If the oil inventory report shows a crude draw, we're likely to test $70 again," Shum said.

Traders are also eyeing the U.S. dollar, as a weaker American currency would bolster prices since investors often look to commodities such as crude as a hedge against inflation.

The euro was steady at $1.3941 on Tuesday.

Olivier Jakob of Petromatrix in Switzerland noted that oil prices had been unusually stable so far in June, with daily closing prices mostly within a narrow range around $68.50.

"Such extreme stability never stays for an extended period of time and is usually concluded by a volatility breakout from the range," Jakob said. "That would be either below $66 or above $70 a barrel ... and given the latest market dynamics we will have a bias towards the upside breakout."

In other Nymex trading, gasoline for July delivery was up 0.56 cent to $1.9416 a gallon and heating oil rose 1.2 cents to $1.7799. Natural gas for July delivery was down 5.6 cents at $3.787 per 1,000 cubic feet.

In London, Brent prices gained 78 cents to $68.66 a barrel on the ICE Futures exchange.

[Associated Press; By PABLO GORONDI]

Associated Press writer Alex Kenendy in Singapore contributed to this report.

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