Oil surges on signs of increased demand

Oil surges on signs of increased demand

New York: Crude oil rose above $71 (Rs3,400) a barrel for the first time in a month as increasing industrial activity bolstered optimism that fuel consumption will rebound.

Oil climbed as much as 3.6% after reports showed that US manufacturing shrank at the slowest pace in 11 months and factory output in China advanced to the highest level in almost a year. The five-month rally of the Standard and Poor’s 500 index also bolstered optimism about commodity demand and prices.

“Good financials and better economic prospects are leading to exuberance in commodity markets," said Michael Lynch, president of Strategic Energy and Economic Research, in Winchester, Massachusetts.

Crude oil for September delivery rose $2.39, or 3.4%, to $71.84 a barrel at 10.18am on the New York Mercantile Exchange. Futures touched $71.95, the highest since June 30.

Oil may rise more than other commodities as demand rebounds, said Nouriel Roubini, the New York University economist who predicted the credit crisis.

Brent crude oil for September settlement gained $1.96, or 2.7%, to $73.66 a barrel on London’s ICE Futures Europe exchange. Prices touched $73.69, the highest since 15 October.