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Oil Prices Surge on Demand From China

Growing demand from China pushed oil prices to their highest levels in six months.

The price of crude oil for future delivery topped $60 a barrel during trading Tuesday in New York before closing slightly lower at $58.83 a barrel.

Prices jumped after China, the world's second-largest consumer of energy, announced it had increased its imports of crude oil by 14 percent in April.  

Oil prices have now gained more than 30 percent this year after plunging from a high of near $150 a barrel last July as the global recession slowed business and slashed demand.

Top officials with the Organization of Petroleum Exporting Countries (OPEC) have said members need the price of oil to reach about $70 a barrel to support their economies.

OPEC members have been cutting production to reach that goal and are scheduled to consider more production cuts when they meet on May 28 in Vienna.

Meanwhile, the U.S. Department of Energy said Tuesday it expects weak demand for oil for the rest of the year because of slow economic growth and big inventories.  A report from the department said Tuesday oil prices will remain at about $55 a barrel until 2010.

Also Tuesday, the International Energy Agency (IEA) said the world's capacity to produce crude oil will fall by 1.7 million barrels a day this year.

IEA Executive Director Nobuo Tanaka said the drop will affect both OPEC and non-OPEC countries.

The IEA is an advisor on energy issues to almost 30 countries.  Earlier this year it warned additional production cuts could boost prices enough to hurt chances for a global economic recovery.

U.S. Energy Secretary Steven Chu also has warned that oil prices of about $70 a barrel could put a "huge strain" on the global economy.


Some information for this report was provided by Bloomberg and Reuters.

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