Oil and natural gas prices rose sharply Monday on the weakening dollar and on new signs of life from manufacturers that suggest the recession may be loosening its grip, Associated Press reported.
Benchmark crude for September delivery rose 3 percent, or $2.13 to settle at $71.58 a barrel on the New York Mercantile Exchange. It was the third straight day of substantial increases on the energy futures markets and the first time in a month that crude traded above $70.
Retail gasoline prices rose overnight yet again.
Natural gas, a major source of power generation, spiked by more than 9 percent on a day when both China and the United States reported stronger manufacturing activity.
Production from U.S. manufacturers jumped to its highest level in more than two years last month with new orders to restock businesses that had cleared inventories as the economy slumped.
The decline in manufacturing has been slowing since December and officials with the Institute for Supply Management, a trade group of purchasing executives, said Monday that signs of growth in the sector could emerge as early as next month.
Manufacturing in China expanded at its fastest clip in a year, according to a survey by Hong Kong brokerage CLSA Asia-Pacific Markets.
Still, crude has been rising for the past several weeks on the downward trend for the U.S. dollar.
The dollar index reached its lowest point since September against the euro on Monday.
Money floods into equities markets when the dollar falls because products like crude are priced in the U.S currency. Oil can be used as a hedge against inflation and it also becomes cheaper when the dollar falls.
Still, energy experts believe the price of oil and natural gas may be higher than they should be right now.
A barrel of crude reached as high as $72.20 in midday trading, a price some believe will give way soon.
Oil prices seesawed last week before surging Thursday and Friday as investors bet that crude demand, which has been tepid this summer, will eventually pick up as the economy improves.
Prices at the pump also moved higher, adding 1.1 cents overnight to $2.549 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. While gas was closer to $4 than $3 per gallon at this time year, prices have been rising daily since July 22, and are up a nickel since last week.
In other Nymex trading, gasoline for August delivery rose 5.67 cents to settle at $2.0693 a gallon and heating oil gained 3.88 cents to settle at $1.8713. Natural gas for August delivery jumped 37.8 cents to settle at $4.031 per 1,000 cubic feet.
In London, Brent crude prices rose $1.85 to settle at $73.55 a barrel on the ICE Futures exchange.