Oil rises to near $69 as investors weigh outlook

Oil prices rose to near $69 a barrel Tuesday as traders brushed off concerns that the doubling of crude prices since March is out of step with a weak global economy.

Benchmark crude for July delivery was up 67 cents to $68.76 a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange. Earlier in the session, prices hit $69.37 before falling back. On Monday, it fell 35 cents to settle at $68.09.

Oil prices have joined a surge in equity markets on investor optimism that the worst of a global recession is over. Crude touched above $70 a barrel last week, the highest since October.

However, crude inventories remain near 19-year highs and demand in the U.S., the world's largest consumer of oil, is sluggish.

``There continues to be some economic optimism out there,'' said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore. ``Investors have brushed aside any near-term concerns about the weak oil market fundamentals.''

Wednesday's release of petroleum inventory data from the Energy Department's Energy Information Administration could provide some insight about crude demand. Analysts expect a rise of 800,000 barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. Stocks unexpectedly rose last week after dropping the previous three weeks.

``If the oil inventory report shows a crude draw, we're likely to test $70 again,'' Shum said.

Traders are also eyeing the US dollar, as a weaker American currency would bolster prices since investors often look to commodities such as crude as a hedge against inflation.

The euro was steady at $1.3941 on Tuesday. Olivier Jakob of Petromatrix in Switzerland noted that oil prices had been unusually stable so far in June, with daily closing prices mostly within a narrow range around $68.50.

``Such extreme stability never stays for an extended period of time and is usually concluded by a volatility breakout from the range,'' Jakob said. ``That would be either below $66 or above $70 a barrel ... and given the latest market dynamics we will have a bias towards the upside breakout.''

In other Nymex trading, gasoline for July delivery was up 0.56 cent to $1.9416 a gallon and heating oil rose 1.2 cents to $1.7799. Natural gas for July delivery was down 5.6 cents at $3.787 per 1,000 cubic feet.