Oil surges to 10-month high

Oil prices soared on Friday to their highest level since October as investors grow hopeful that a recovery of the world economy is in sight.

On Friday, the price of oil for October delivery rose as high as $74.15, after settling the day before at $72.42. The price of oil hasn't traded that high since Oct. 20, 2008, when it reached an intra-day peak of $76.12.

All told, oil has surged by two-thirds this year since after closing out 2008 at $44.60 per barrel.

Manouchehr Takin, petroleum analyst at the Center for Global Energy Studies in London, said the increases in oil prices don't make sense when you look at them purely at face value.

"On the fundamentals of supply and demand, one cannot explain why the price is high," said Takin. "All the [global] inventories are full. The outlook for the demand for oil in the coming weeks is really weak."

But investors who lack confidence in the volatile stock markets have shifted their money into commodities like oil, which is why prices have been escalating, said Takin.

"There is not much confidence in the stocks around the world," he said. "Obviously commodities is an alternative. They trade in oil, and therefore the paper value goes up."
0:00 /3:12Oil prices endanger recovery

At the same time, analysts say oil investments are being driven by the belief that the worldwide economic downturn has bottomed out and is due for a recovery -- a turn of events that would bolster demand in the near future.

"If things are getting better with the economy, then the demand will rise for commodities, and that's the expectation," said Joseph Stanislaw, independent senior advisor at Deloitte LLP.

In the United States, this perception is likely fueled by positive comments from Federal Reserve Chairman Ben Bernanke and improvements in the housing market.

But Stanislaw noted that it's too early to tell whether this perception of recovery will blossom into a reality.

"What usually happens in this type of economy is that the price rise happens before the demand rise," Stanislaw said. "People want to be there before it happens."