Oil prices jumped lifted by a weaker dollar and bullish demand growth forecast by the Organization of Oil Exporting Countries and The US Energy Information Administration.
The Greenback weakened against a basket of foreign currencies earlier in the day on instability in the bonds market after yield rose to their highest since end of November.
A weaker dollar boosts the demand of commodities denominated in dollars like oil as it makes them affordable to holders of other currencies.
The Wall Street Journal Dollar Index, which tracks the dollar against foreign currencies, fell by 0.7% on the bond market gyrations.
Also aiding the price rally was a report by the US Energy Information Administration showing that output from seven key shale regions fell by 54,000 barrels a day in April and forecasted that the production would fall by a further 86000 barrels a day in June.
The major benchmarks have rallied recently on expectations that US oil production was nearing its peak with producers having cut significantly on the number of active rigs.
Light sweet crude for June delivery most recently traded $1.57 or 2.7% higher at $60.83 a barrel on the New York Mercantile Exchange.
“Oil’s climb is sponsored in part by Monday’s drilling productivity report in the U.S. from the Energy Information Administration, which points to a drop in U.S. oil production at a couple of key shale plays next month,” Matt Smith, commodity analyst at Schneider Electric, told Market Watch.
“This bullish influence is in conjunction with a sliding U.S. dollar amid a strong selloff in global bond markets and equity markets too.”
Brent futures, the global benchmark, climbed by more than $1.97 or 3% to $66.88 a barrel on the London based ICE futures exchange after OPEK upgraded its world oil demand growth forecast for 2013 to 1.18 million barrels per day up from 1.17 million barrels a day.
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