Oil soars above $71, hitting 2009 high

VIENNA  - Oil prices soared above $71 a barrel Wednesday to reach a 2009 high, as investors poured money into crude markets to protect themselves against the inflation risks posed by a weakening U.S. dollar.

Oil, which typically trades inversely to the dollar, has more than doubled in price in three months as traders also cheered news showing the worst of a severe U.S. recession is likely over. They brushed off data - such as a 9.4 percent U.S. unemployment rate in May - that suggest crude demand will remain weak. Even growing inventories have not checked oil's stellar rise.

By late afternoon in Europe, benchmark crude for July delivery was up $1.28 at $71.29 a barrel in electronic trading on the New York Mercantile Exchange after earlier touching a 2009 high of $71.65. On Tuesday, it jumped $1.92 to close at $70.01.

"I wouldn't be surprised if we're testing $80 in a week or two," said Gerard Rigby, energy analyst with Fuel First Consulting in Sydney. "The momentum right now is too strong."

A weaker U.S. dollar and expectations massive fiscal stimulus spending could spark inflation have bolstered the market.

But too rapid a rise to high levels could backfire and hurt chances of economic recovery. Figures released Wednesday showed the U.S. trade deficit edging higher for second straight month in April, reflecting increasing oil prices.

The Energy Department's Energy Information Administration said Tuesday that crude prices will likely average $67 a barrel in the second half of 2009, about $16 higher than the first six months of the year. A month ago, the EIA's price-per-barrel forecast for the second half of 2009 was $55.

The Energy Department also said global consumption of oil, which has fallen by nearly 2 million barrels per day this year, will begin to rebound in 2010 as the economy recovers.

Wednesday's release of petroleum inventory data from the EIA could provide additional insight about crude demand. Analysts expect a rise of 800,000 bar rels.

The upward march of benchmark crude pulled related energy prices higher as well.

In other Nymex trading, gasoline rose by nearly 2 cents to $1.98 a gallon while heating oil fetched $1.83 a gallon - up by more than 2 pennies. Natural gas for July delivery was up by 8 cents, at $3.81 per 1,000 cubic feet.

In London, Brent prices rose in tandem with Nymex crude, gaining 73 cents to $70.35 a barrel on the ICE Futures exchange. Trader and analyst Stephen Schork noted that "for the thirteenth time in the last 15 sessions,London crude for July delivery posted a new year-to-date high."

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Associated Press writer Alex Kennedy contributed to this report from Singapore.