NEW YORK: Oil prices rose Thursday, holding above $70 a barrel as a weaker dollar pushed investors toward energy commodities.
Benchmark crude for September delivery added 36 cents to settle at $70.52 a barrel on the New York Mercantile Exchange. In London, Brent crude prices climbed 59 cents to settle at $73.48 a barrel on the ICE Futures exchange.
Oil prices should be depressed right now, given the tepid demand for gasoline and a growing surplus of crude in the U.S. But Newedge analyst Antoine Halff said the tactic of buying oil contracts as a hedge against inflation is “back with a vengeance.”
Benchmark crude, which is priced in dollars, tends to rise when the dollar falls as foreign investors gain more buying power. It’s recently become a convenient place to park large amounts of cash as the dollar loses ground to other currencies.
Investors also have been pumping money into oil based on general enthusiasm about the path of the global economy. This week, analysts with Barclays Capital went as far as predicting that the recession already has ended in many countries, and oil demand will surge in the second half of the year.
Tom Kloza, publisher and chief oil analyst at Oil Price Information Service, said it’s mostly wishful thinking.
“None of the statistics really point to anything happening on the ground in terms of demand,” Kloza said. “It seems like there’s very comfortable amounts of crude oil out there.”
Meanwhile, government reports showed that the economy remains on shaky ground.
The Commerce Department said Thursday that retail sales fell 0.1 percent last month. Economists expected a gain of 0.7 percent. And the Labor Department said initial jobless claims grew more than expected to a seasonally adjusted 558,000.
