LONDON (AFP) — Oil prices hit 71 dollars on Wednesday, scaling eight-month highs as traders tracked plunging American crude reserves, the weak dollar and hopes of a recovery in global energy demand.
New York's main futures contract, light sweet crude for delivery in July, surged as high as 71.79 dollars per barrel, the highest level since October.
The contract later stood at 71.19, up 1.18 dollars from Tuesday's closing level.
Brent North Sea crude for July delivery advanced 94 cents to 70.56 dollars a barrel, having earlier touched 71.20.
The US government's Energy Information Administration said Wednesday that American crude reserves sank 4.4 million barrels in the week ending June 5, signalling strong demand in the world's biggest energy consuming nation.
That was far greater than market expectations of a 700,000-barrel decline, according to analysts polled by Dow Jones Newswires.
Torbjorn Kjus, oil analyst at DnB NOR Markets, described the report as "bullish", indicating that it could drive prices even higher.
This week, the market has also won strong support from the struggling US currency, which makes dollar-priced crude cheaper for buyers holding stronger currencies. That tends to stimulate demand and push the market higher.
"The momentum in commodities is predominantly being driven by dollar weakness," said VTB Capital analyst Andrey Kryuchenkov.
Oil prices have slumped since scaling historic peaks of more than 147 dollars a barrel in July, as the global economic and financial crisis has clobbered energy demand.
British energy company BP said Wednesday that global oil consumption fell 0.6 percent in 2008, the first annual decline since 1993 and the largest drop since 1982, as the economic downturn slashed demand.
The company said global oil output rose to 81.8 million barrels per day in 2008 from the previous year. However, worldwide consumption retreated by 420,000 barrels per day.
BP Chief Executive Tony Hayward also forecast on Wednesday that world oil prices would trade between 60-90 dollars per barrel in the coming years.
"I think there's a rational argument, for where we are today, that an oil price somewhere between 60-90 dollars is the right sort of range," said Hayward.
Oil producing nations needed above 60 dollars to balance their books, while consumers appeared comfortable with prices beneath 90 dollars, he argued.
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