Oil hovers above $86 after 2-month, 24 pct rally

[April 20, 2010]  SINGAPORE (AP) -- Oil prices hovered near 18-month highs above $86 a barrel Tuesday in Asia as traders mulled whether a recovering U.S. economy warranted further gains.

Benchmark crude for May delivery was down 20 cents to $86.42 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract rose $1.75 to settle at $86.62 on Monday, the highest since October 2008.

Oil has jumped 24 percent since early February.

Crude had traded between $69 and $84 for about nine months before breaking out last week amid investor optimism an improving U.S. economy will eventually boost crude demand. On Monday, reports showed strong improvements in demand at services businesses and in the housing market.

"We have a general sense that the economy is improving, and investors are now able to see a possible outlook for greater driving demand," Cameron Hanover said in a report. "There may be a lull as we await this week's supply and demand statistics."

The Energy Department is scheduled to released its weekly crude inventory data Wednesday.

In other Nymex trading in May contracts, heating oil fell 0.61 cent to $2.2614 a gallon, and gasoline dropped 0.80 cent to $2.3422 a gallon. Natural gas jumped 2.5 cents to $4.302 per 1,000 cubic feet.

In London, Brent crude was up 27 cents at $85.61 on the ICE futures exchange.

[Associated Press; By ALEX KENNEDY]

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