Crude oil futures traded at their highest levels for three weeks Friday as European equities extended their rally to preserve hopes that economic recovery and an associated increase in crude demand is underway.

ICE September Brent traded within four cents of the psychologically important $70 a barrel mark, as European equity indexes reached their highest levels in six months or more.

Prices pared their earlier gains, however. Concerns remain that oil prices
may have outrun the near-term fundamental justification for their recent moves, leaving them susceptible to a pullback – particularly should the equity rally stall.

“From a fundamental point of view, there have hardly been any developments that would justify the recent 15% surge in the oil price,” said Eugen Weinberg, analyst at Commerzbank in Frankfurt. Nonetheless, “rising U.S. equity markets and a weak U.S. dollar…should continue to be driving factors for oil in the short term.”

At 1154 GMT, the front-month September Brent contract on London’s ICE futures exchange was up 4 cents at $69.29 a barrel.

The front-month September light, sweet, crude contract on the New York
Mercantile Exchange was trading 2 cents lower at $67.14 a barrel.

The ICE’s gasoil contract for August delivery was up $4.75 at $567.50 a
metric ton, while Nymex gasoline for August delivery was up 57 points at 191.89 cents a gallon.

“Equities rise, index fund managers expect the economy to improve, and they buy oil on the expectation that energy consumption will ultimately improve,” said Peter Beutel, president of trading advisory Cameron Hanover. Little attention is given to “high inventories, poor demand or overbought pressures” however, he added.

Products prices rose Friday in spite of latest U.S. data showing gasoline and
distillate stockpiles have continued to climb as a result of straitened U.S.
demand. Lower refinery utilization levels reported in Wednesday’s Department of Energy data was cited as generating concerns that products stocks could fall, although such a scenario could also have a negative effect on crude demand given the reduced refinery demand for oil.