Oil price soars to near $73


July 15, 2010 Updated Jun 14, 2009 at 9:42 PM CDT

Oil prices struck eight-month highs Thursday, reaching almost 73 dollars in New York, as the IEA hiked its global demand estimate for the first time in months.

New York's main futures contract, light sweet crude for delivery in July, surged as high as 72.78 dollars a barrel -- a level last seen in October -- also a day after the US government announced a big drop in its crude reserves.

The contract was later trading at 72.74 dollars, up 1.41 dollars from Wednesday's close.

Brent North Sea crude for July delivery was one dollar higher at 71.80 dollars in late London deals after striking an eight-month pinnacle of 71.93.

The International Energy Agency (IEA) said in its June report on Thursday that the oil market may be sending a message that the recession is easing in advanced economies.

Global oil demand was now estimated by the IEA to be 83.3 million barrels a day this year, up from 83.18 million barrels in the May report, to show a fall of 2.5 million barrels a day or of 2.9 percent from the level last year.

"Markets are currently in a phase of identifying green or bamboo shoots and the IEA making the first upward revision to demand for the last 10 months will likely be taken as an additional green shoot," said PetroMatrix analyst Olivier Jakob.

However, he added: "These revisions do not necessarily imply the beginnings of a global economic recovery, and may only signal the bottoming out of the recession."

The IEA, the energy-monitoring arm of the 30-nation Organization for Economic Cooperation and Development, also raised slightly its estimate for OECD demand this year to 45.2 million barrels per day, to show a fall of 2.3 million barrels per day or 4.9 percent from consumption last year.

This was also 120,000 barrels per day higher than previously expected, signalling that the increase for the OECD accounted for all of the global increase.

The IEA said data suggested that this slight upward boost came from leading industrialised economies and particularly from activity in the United States.

A recent 20-dollar surge in the oil price and unexpectedly strong US consumption were among signals that the recession may be receding, it added.

Oil had topped 71 dollars on Wednesday as traders tracked plunging American crude reserves, a weak dollar and hopes of a recovery in global energy demand.

The US Energy Information Administration revealed that US crude inventories had tumbled 4.4 million barrels last week -- far more than market expectations of a 700,000-barrel drop.

The IEA suggested Thursday that industrial demand was picking up although consumption by the transportation and services sectors remained depressed.

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