OIL prices rose to near seven-month highs yesterday as improving global factory activity bolstered expectations of an economic recovery.
Data showed US manufacturing shrank at a slower-than-expected rate in May, while industrial activity expanded in China. Surveys in Europe showed the manufacturing recession was easing.
Crude oil for July delivery traded up $2.27 at $68.58 a barrel in New York – the highest since early November when it settled at $70.53.
Brent crude in London gained $2.45 to $67.97 a barrel as prices were further supported as the US dollar fell to the lowest level this year, boosting investor demand for oil and commodities.
The economic slowdown battered global demand and sent crude off record highs above $147 a barrel struck last July to below $33, prompting oil export cartel Opec to agree to a series of deep output cuts last year.
Oil rallied by 30% in May on signs of a turnaround, pushing Opec to maintain output targets when it met in Vienna last week.
The head of the International Energy Agency (IEA) said global oil demand may not have bottomed out yet but could recover by the end of 2009 if the economy gets back on track.
Nobuo Tanaka said: “If economic growth comes back as the World Bank or International Monetary Fund have been saying, and if Opec continues the current production level, the demand level may come back to the regular five-year average towards the end of the year.”