Markets: Oil breaks through $70

Commodities prices on Wednesday extended their rally, with crude oil trading above $71.5 a barrel at a fresh seven month high, spurred by signs that the global economy may have bottomed, a drop in US oil stocks and US dollar weakness.

Nymex July West Texas Intermediate, the US benchmark, rose $1.49 to $71.50 a barrel, its highest since early November. Earlier, it hit an intraday high of $71.60 a barrel. Meanwhile, ICE July Brent rose $1.24 to $70.86 a barrel.

The surge came after the American Petroleum Institute, the industry body, reported a larger-than-expected drop in US oil inventories of almost 6m barrels, against Wall Street’s forecast of 400,000 barrels. Although API statistics are less important than the official US Department of Energy figures, to be released later on Wednesday, the market still takes them as a sign of the direction of the official numbers.

Oil has doubled in price since the market turmoil of late last year, with WTI gaining 60 per cent since January 1, as speculators have begun to take bets on a rebounding global economy resulting in higher crude prices.

Production cuts by OPEC, the international oil cartel, of over 4 million barrels per day since September have also contributed to rising oil prices.

The negative correlation between the US dollar and dollar denominated commodities continued, with dollar weakness helping push several base metals to fresh monthly highs.

Read the full commodities report