NEW YORK – Oil prices on Thursday set a new high for the year, buoyed by a weaker dollar and the first drop in unemployment since January.
Benchmark crude for July delivery was up $2.69 to settle at $68.81 a barrel on the New York Mercantile Exchange. Oil climbed as high as $69.60 earlier in the day.
In London, Brent prices rose $2.83 to settle at $68.71 a barrel on the ICE Futures exchange.
Oil prices have rallied for three months, and they soared this week to their highest levels since November. Crude now fetches nearly twice its February price, mostly on the expectation that the dismal U.S. economy could be stabilizing.
A government report provided some evidence of that Thursday, saying the nation's unemployment rolls fell for the first time in 20 weeks. The Labor Department said the number of people filing for jobless benefits dropped by 15,000 to 6.7 million.
The dollar also fell against the euro and the yen, a move that tends to push oil prices higher since the benchmark contract is traded in U.S. currency. And tanker tracker Oil Movements reported a slight drop in OPEC exports as the cartel tries to match a slump in global demand.
Goldman Sachs boosted its forecast for benchmark crude based on expectations that the economy will stabilize and OPEC production cuts will shrink global supplies. It now expects oil to cost $85 a barrel by the end of the year, up from its previous estimate of $65 a barrel.
Nevertheless, experts say the market is filled with more enthusiasm than is warranted by the huge surplus of petroleum in the U.S.
On Thursday, the Energy Information Administration said the country's supply of natural gas rose more than expected last week to 2.34 trillion cubic feet. Natural gas is a major energy source for power plants, and the bloated inventory is a sign of how much manufacturers and other industries have slowed down.
"It's certainly hard to see anything in the fundamental numbers to support" higher crude prices, said Michael Lynch, president of Strategic Energy & Economic Research. "The psychology has shifted, and people seize on the bullish news and ignore the bearish news."
On Wednesday a Commerce Department report showed a smaller-than-expected rise in factory orders. And the Institute for Supply Management, a trade group of purchasing executives, said the services sector shrank in May below economists' estimates at the slowest pace since October.
Retail gas prices continued to climb Thursday, adding 2.4 cents a gallon overnight to a new national average of $2.572 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Pump prices are 49.3 cents a gallon more expensive than last month, but they're $1.411 a gallon cheaper than the same period last year.
In other Nymex trading, gasoline for July delivery rose 6.05 cents to settle at $1.9621 a gallon and heating oil gained 4.56 cents to settle at $1.784 a gallon. Natural gas for July delivery added 4.4 cents to settle at $3.81 per 1,000 cubic feet.
Associated Press writers Pablo Gorondi in Budapest, Hungary and Alex Kennedy in Singapore contributed to this report.