Oil tops $60, defying recession

NEW YORK: Crude oil prices briefly topped $60 a barrel early Tuesday, riding an unexpected wave of enthusiasm for the fuel in the midst of global recession.The rising price will pinch consumers and industries that had found lower oil prices one of the few bright spots in the economic downturn. But $60 oil also could boost oil company profits enough to avoid deep cuts in spending on production -- cutbacks that many experts have warned could set up a jarring price spike when demand recovers.Investors helped drive up oil prices in recent weeks, pulling their money out of cash and putting it into hard assets such as crude oil as they anticipated imminent economic recovery and a weaker dollar -- and were willing to stomach more risk. Oil futures briefly topped $60 a barrel in trading Tuesday on the New York Mercantile Exchange for the first time since November, before falling back to close at $58.85, up 35 cents. Oil prices are up 73% since bottoming out at just under $34 in February.Oil prices are rising even as U.S. demand for petroleum products has fallen to its lowest level in a decade. But while U.S. drivers and industries have been slow to increase energy consumption, Chinese oil demand is strong. On Tuesday, China reported near-record volumes of oil imports, indicating that an aggressive economic-stimulus effort by the Chinese government is reviving consumption. April imports were up nearly 14% from a year ago. Chinese car sales last month set a new record.The thirst for oil from emerging markets was a prime reason prices surged several years ago, breaking through $60 a barrel for the first time in mid-2005. Rapid growth in Chinese demand laid the groundwork for a period of record-breaking prices and profits. Asian demand is expected to continue to have a big impact on prices, as any rebound in consumption in the U.S. and Europe is tempered by increased energy efficiency and an emphasis on renewable fuels.There are 2.5 billion people in China and India rising to the level of middle-class consumers, and there's declining production in the world's maturing oil fields, noted Chris Ross, a vice president of economic consultant CRA International. "You put that together and you have the pretty serious foundation for a more robust price environment," he said.Oil's rapid return to $60 has sparked concern that rising prices could slow an economic recovery. Noting that a $10 a barrel rise in oil prices translates into a $5.5 billion monthly hit to U.S. consumers and industry, J. P. Morgan analysts recently said that "in the current fragile economic state, [rising oil prices] may be an unnecessary shock."Still, the current rally in crude prices, so far a shadow of last year's race to $145 a barrel, might defuse the potential for a much more dramatic price spike when oil demand returns in the U.S. and other industrialized economies. Current prices should bolster some energy companies' decisions to continue drilling through the relatively brief period of low prices, limiting the possibility of a future supply crunch. Industry behemoths such as Exxon Mobil Corp. and Royal Dutch Shell PLC have maintained their multibillion-dollar capital budgets, despite falling profits in recent quarters.