Oil jumps above $70 on optimism demand to recover

SINGAPORE: Oil prices jumped above $70 a barrel on 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.

In London, Brent prices rose 58 cents to $72.28 a barrel on the ICE Futures exchange.