Oil jumps above $70 on optimism demand to recover

By ALEX KENNEDY, Associated Press Writer Alex Kennedy, Associated Press Writer

SINGAPORE – Oil prices jumped above $70 a barrel Monday in Asia on investor expectations a recovering global economy will boost crude demand.

Benchmark crude for September delivery was up 73 cents to $70.18 a barrel by midday Singapore time in electronic trading on the New York Mercantile Exchange. On Friday, the contract rose $2.51 to settle at $69.45.

Oil prices seesawed last week before surging Thursday and Friday as investors bet that crude demand, which has been tepid this summer, will eventually pick up as the economy improves.

"Optimism for economic recovery is fighting the weak fundamentals, and right now the optimism is holding the upper hand," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Crude also has followed gains in global stocks. Most Asian indexes were up in early trading.

Prices may test an eight-month high of $73.23 a barrel in the coming days, but dismal consumer sentiment in the U.S. will likely weigh on demand and send prices back into the $60s, Shum said.

"It will be difficult for oil prices to sustain in the $70s given the weak fundamentals," he said.

Mohammad Ali Khatibi, Iran's governor to the Organization of Petroleum Exporting Countries, said Sunday he expects crude prices to reach $80 a barrel by January, the oil ministry said.

In other Nymex trading, gasoline for August delivery rose 1.24 cents to $2.03 a gallon and heating oil gained 1.11 cents to $1.84. Natural gas for August delivery fell 1.6 cents to $3.64 per 1,000 cubic feet.