Oil reaches a six-month high as the gloom lifts

Oil rose above $60 a barrel today on growing hopes that the worst of the global recession may be over.

Crude was up 45 cents to a six-month high of $60.55 a barrel in New York and up 27 cents to $59.19 in London, having been around $35 a barrel as recently as March.

Commodities markets have closely tracked the stock market in recent months as dealers seek signs of economic health. The FTSE 100 index has risen more than 25% since its year-low of 3512 in March.

"Oil prices are mostly tracking stocks," said Michelle Kwek, an analyst at Informa Global Markets. "The move from $50 to $60 is quite abrupt. I don't think oil prices can go much higher at this point. I think a lot of oil's rise has been driven by speculation that the worst is over, but is the real demand there yet?"

Oil peaked at a record of $147 a barrel in July but fell below $33 in December as the financial crisis plunged the world into recession.

The International Energy Agency today warned of a surge in oil prices over the next three years due to a lack of investment in energy in the downturn. The Paris-based watchdog, funded by the world's 28 biggest energy consumers, said oil companies have cancelled or postponed about $170 billion of investment in recent months.

"What we're saying is that come around 2012 the impact of this big recession on oil investment and capacity, if current trends continue, could be severe with much higher oil prices," said IEA chief economist Fatih Birol.

The report highlights the risk that the supply of oil could fall short of demand once the global economy recovers.