SINGAPORE, June 10 – Oil prices breached 71 dollars a barrel to their highest level in eight months in Asian trade on Wednesday on weakness in the US dollar and hopes of a recovery in the global economy, analysts said.
New York\’s main futures contract, light sweet crude for July delivery, surged 1.09 dollars to 71.10 dollars a barrel in the afternoon.
Oil was last seen above 71 dollars in October last year when prices plunged from historic peaks of more than 147 dollars a barrel in July after the global economic and financial crisis clobbered energy demand.
Brent North Sea crude for delivery in July was up 89 cents to 70.51 dollars.
Analysts attributed the price rise to signs that the worst is over for the recession-hit US economy, the world\’s biggest energy consumer, as well as weakness in the US dollar.
A weaker dollar makes dollar-priced crude cheaper for buyers holding stronger currencies. That tends to stimulate demand and push the market higher.
The dollar was down against the yen and euro in Asia Wednesday as fund flows into the greenback, seen as a safe-haven currency, fell amid increased risk appetite, dealers said.
Singapore\’s DBS Bank said the US dollar weakness was likely to be a topic during a meeting of the Group of Eight (G8) industrialised countries in Italy this weekend.
"It will be interesting to see how G8 policymakers are coping with the weak underlying tone of the US dollar," DBS said in a research note.
"Expect discomfort regarding the USD\’s weakness on a US-led rise in long-term bond yields worldwide and rising oil prices."
Oil prices were up even as the US Energy Information Administration (EIA), the Energy Department\’s analytical and statistics wing, said Tuesday that global oil demand was expected to fall two percent to 83.7 million barrels a day.
"The EIA revised upward its demand forecast," said Tony Nunan, an energy risk manager with Mitsubishi Corp in Tokyo. "People have been waiting for when the demand would hit rock-bottom, and this is the first sign of that."