London: Oil rose above $64 a barrel on Monday, extending the previous session’s rally, as equities firmed and the dollar fell on hopes of a global economic recovery.
The market jumped 6.1% last week - its first weekly gain in a month - thanks to a series of positive economic data and a rally in equities due to better-than-expected US corporate earnings.
US crude oil for August delivery rose 88 cents to $64.44 a barrel by 1:48pm, Brent crude for September rose 94 cents to $66.32.
“Gains in the stock markets are lifting risk appetite, which is helping to push oil prices higher,” said Ben Westmore, a commodities analyst at the National Bank of Australia.
The MSCI index of Asia Pacific stocks outside Japan climbed for a fifth session to the highest since late September 2008 on Monday. European stocks made early gains, while the increase in risk appetite knocked the dollar.
Oil’s gains on Friday were sparked by US housing data which showed construction of new homes and building permits rose more than expected in June, signalling a potential economic recovery.
More support for prices came from renewed protests in major oil exporter Iran and a tropical wave in the Atlantic. Storms in the US Gulf can disrupt oil and gas supplies from the region.
Oil hit a 2009 high of $73.38 on 30 June, up from a low of $32.40 reached in December, boosted in part by supply curbs from the Organization of the Petroleum Exporting Countries.
In a sign that investors were now more bullish on oil prices, crude oil speculators on the New York Mercantile Exchange increased their net long positions in the week to 14 July.
Still, with oil prices having rebounded last week, some analysts are cautioning against excessive optimism as the latest inventory data in the United States was still painting a bearish picture for energy demand.
“As was the case with the March-June upward trend and the subsequent correction, price action in recent days has been, in our view, driven by non-fundamentals,” said Michael Wittner of Societe Generale in a report.
“When prices are being driven by non-fundamentals, we are cautious, and doubly so when trying to call a turn,” Wittner said, adding that technical analysis indicates another downward move should be expected this week.