Oil Tops $69, Closes on Another 2009 High
by Phaedra Friend
After yesterday's dismal numbers, oil prices increased 4.1% in New York Mercantile Stock Exchange trading Thursday. Reigniting May’s 30% rally, oil prices jumped $2.69 to settle at $68.81 today. In fact, intra-day trading saw crude prices surge as high as $69.60.
Following the same trend, natural gas rose 1.1%, increasing 4.2 cents to $3.808 per mmBtu in trading on the NYMEX Thursday. Brent crude futures also settled higher today, climbing $3.39 on London's ICE to $69.27 a barrel.
Bolstering beliefs that the worst of the economic slump has passed, the US Labor Department reported today that initial jobless claims fell by 4,000 to 621,000 for the week ending May 30, which is the first drop in the last five months.
Also helping to boost prices, Goldman Sachs forecasted that oil prices would reach $85 a barrel by year's end, due in part to dwindling supplies and increasing demand.
"I think overall with oil and gas, obviously the focus isn't on current supply, because if it were, oil and natural gas would be lower than what they are now," remarked Phil Flynn, vice president and senior analyst for Alaron Trading in Chicago.
"Really, we're seeing the energy markets being driven by more serious concerns," Flynn continued. "The prices are being driven by the US budget and trade deficits, and what's happening around the globe."
While prices dropped in Wednesday's trading due primarily to an increase in US inventories, investors continue to hold to the belief that the economy and demand will improve in the future.
"I think that what we’re going to find is this market is very concerned by the amount of spending the government is doing," Flynn advised. "I think what we really need to focus on is the widening yield curve in the Treasury bond market; it's very inflationary, and the commodities markets are reflecting this concern."
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