Oil breaks out above 2009 high

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This comes via the National Post:

Oil rose above US$74 a barrel on Monday, extending its rally to trade near a 10-month high, on optimism that an economic recovery will spur a rebound in energy demand.

A string of positive economic data from various countries and rallying stock markets helped lift oil prices by 9.5% last week. Crude is up more than 65% in 2009 and may head higher still.

"We could now easily move toward the US$80 mark if the growing enthusiasm about the budding economic recovery continues to dominate sentiment," said Edward Meir of MF Global.

"A breakout is taking root as the previous high of US$73.38 has now been taken out on a closing basis," he said of U.S. crude.

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If you recall, oil prices didn’t hit $74 until 2007.  I certainly think this breakout that eventually peaked at $147.30  in 2008 was a major contributing factor to the severity of the downturn.

And here we are again with prices having more than doubled since they bottomed early this year. I certainly see this as a potential transmission mechanism for what is now asset price inflation into what could soon become consumer price inflation.

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If you are worried about a double dip, this trend bears watching.

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