Oil tops 70 buck aronies per barrel...

http://online.wsj.com/article/BT-CO-...09-713262.html

By Gregory Meyer and Madalina Iacob
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Crude oil cleared $70 a barrel by a whisker on Tuesday, getting an immediate boost from a weaker dollar as traders continue to bet a stronger economy will lift soft demand.

Light, sweet crude for July delivery settled at $70.01 a barrel, climbing $1.92, or 2.8%, on the New York Mercantile Exchange and notching a seven-month high. Brent crude on the ICE Futures exchange settled at $68.62 a barrel, up $1.74 or 2.6%.

Crude took support as the dollar weakened against the euro, making commodities more attractive to investors seeking a currency hedge. The euro was recently $1.41, from $1.39 late Monday.

Oil pushed above $70 late in the period during which floor trading was still open as U.S. stock markets shed early losses. The positive sentiment bled into the oil market.

"The dollar is again showing some weakness, and you've had the stock market tick up and become positive," said Raymond Carbone, president of Paramount Options on the Nymex floor. "That's what's driving the crude oil market again,"

Crude's insistent rise - up more than 50% since mid-April - has defied the bleak state of oil demand. The U.S. Energy Information Administration on Tuesday reiterated its view that the world will consume less oil this year, with demand falling 2% to 83.7 million barrels a day.

The EIA, the Energy Department's analytical and statistics wing, also hiked its oil price forecast and now sees crude averaging $67 a barrel in the last six months of the year. Oil's surprising strength over the past three months was largely due to the weaker dollar, more active financial markets and the belief that an economic recovery could end the demand nosedive, the EIA said. Other high-profile oil analysts have also raised their price forecasts in recent weeks.

Some observers, however, are baffled by crude oil's persistent rise despite the notable lack of increase to global demand now. It was the falloff in demand, which was sparked by the intensification of the economic crisis last year, that took oil down from the record highs above $145 a barrel hit last summer.

"We are ignoring fundamentals," said Tim Evans, energy analyst at Citi Futures Perspective. "The unemployment rate continues to rise, which is not good for gasoline consumption. To pretend that there is nothing but blue skies going forward, it's a naive economic assumption."

All eyes are set now on weekly U.S. oil inventories data due Wednesday from the EIA. Analysts surveyed by Dow Jones Newswires say that in the week ended June 5, crude oil inventories likely fell by 700,000 barrels, while gasoline inventories rose 800,000 barrels and distillates rose 1.5 million barrels. Analysts see U.S. refineries operating at 86.8% of capacity, up 0.5 percentage point.

U.S. oil data compiled by the American Petroleum Institute is scheduled to be released 4:30 p.m. EDT Tuesday.

Front-month July reformulated gasoline blendstock, or RBOB, rose 3.07 cents, or 1.6%, to $1.9667 a gallon. July heating oil rose 3.97 cents, or 2.3%, to $1.8076 a gallon.