LONDON – Oil climbed back toward $70 a barrel on Thursday as the market focused once more on resilient demand from the world's biggest consumer the United States and global supply risks.
Oil has hugged $70 a barrel since mid-May, closing in a $68-73 range each day, according to Reuters data.
Prices have stubbornly held near the April peak of $75.35, their highest level in real terms since 1980, the year after the Iranian revolution, despite signs that energy-fuelled inflation is forcing interest rates higher and could undermine oil demand.
U.S. crude gained 36 cents to $69.50 a barrel after touching as high as $70.25 a barrel. London Brent crude was up 45 cents at $67.43.
Stocks and other commodities markets also recovered ground after a sell-off at the start of this week. European and U.S. shares rose along with precious metals.
"Financial investors in commodities, including oil, remain cautious, despite oil-specific fundamentals that remain supportive," said Mike Wittner, Global Head of Energy Market Research at investment bank Calyon.
The markets took support Thursday after U.S. Federal Reserve Chairman Ben Bernanke said the strong productivity advances the United States has enjoyed in recent years looked likely to continue, even as higher energy costs weighed.
"Although productivity gains are very difficult to predict it seems that the 2.5 to 3 percent we've been seeing in recent years is likely to continue for some years ahead and that's very good news for the U.S. economy," Bernanke told the Economic Club of Chicago.
Oil, the biggest component of several major commodities indexes, tumbled from an intra-day high of $72.32 a barrel on Monday to $68.10 early Wednesday as risk-averse investors fled stocks and commodities.
Oil's rebound since then has helped steady nerves and gathered pace late Wednesday on news U.S. crude stocks fell more than expected last week as refiners increased runs to meet peak summer gasoline demand.
"The floor on oil prices keeps creeping higher," said David Dugdale of MFC Global Investment Management.
"Prices of many commodities including metals have come sharply off from their highs in May, but oil has stubbornly remained around the $70 level. It appears that we may stay in a tight band around the $70 mark for the next several months."
Kuwaiti Oil Minister Sheikh Ahmad al-Fahd al-Sabah told reporters in New Delhi that he expected oil to hover in a $65-$70 range in the coming months.
Real or feared disruptions to oil supplies from Iraq, Nigeria and Iran are also supporting prices.
Nigerian militants have halted a quarter of output in the world's eighth biggest exporter.
Analysts say it is too early to say Iraq's once mighty oil industry is on the mend, despite the restart of its sabotage-hit northern export pipeline after a four-month gap and the killing last week of Iraq al-Qaeda leader Abu Musab al-Zarqawi.
Iran has yet to give a formal response to incentives offered by world powers to end a stand-off over its atomic programme. Oil consumers fear an interruption in supplies from the world's fourth biggest oil exporter if the dispute drags on.
The 35-nation board of the International Atomic Energy Agency meets in Vienna on Thursday to debate the situation.
"Even if we don't have geological peak oil, we are probably seeing a period of political peak oil, where political problems continue to constrain the market," said Paul Domjan of consultant JH&CO at a London conference, referring to the peak oil theory that oil supplies are fast running out.
Overall, oil prices are nearly 14 percent up so far this year and have surged from $20 a barrel at the start of 2002.