Oil jumps on global stock rally
Dollar and Treasurys fall following General Motors' bankruptcy filing.
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| Click on the chart to see other prices of commodities. |
NEW YORK (CNNMoney.com) -- Oil prices rose Monday after global stock markets rallied and the dollar and Treasurys fell, following General Motors Corp.'s bankruptcy filing.
Light, sweet crude for July delivery rose $2.27, or more than 3.4%, to settle at $68.58 a barrel Monday.
The last time oil prices reached these levels was Nov. 4, when oil settled at $70.53.
Stock markets around the world rallied and U.S. stocks rode on the back of that upward momentum. A handful of better than expected economic reports added to the growing sentiment that the economy is on the brink of recovery.
The Dow Jones industrial average (INDU) added 221 points with 1 hour left in the session.
Investors use stock markets as a bellwether for the economy, and a stronger economy demands more energy. In recent months, oil prices have largely tracked stock markets because investors bet that as the economy goes, so goes demand for oil.
As stocks surged, Treasury prices fell and the dollar weakened. Government debt and the greenback are both perceived as investor safe havens, but as recovery hopes gain strength, investors move funds into higher yielding assets.
The weakening dollar boosted oil prices. Crude is traded in the U.S. currency around the globe, and so a weaker dollar pushes the prices of oil up in relation to other currencies. The euro was up 0.3% against the dollar and the British pound gained 1.7% against it. Meanwhile, the dollar gained 1.3% against the Japanese yen, which is another currency often considered a safe haven for investors.
The global rally in stocks came as General Motors (GM, Fortune 500), one of three major U.S. automakers and long a symbol of domestic manufacturing power, filed for bankruptcy protection.
The weakness in the dollar was also a result of inflationary fears in the wake of the unprecedented spending initiatives from the government to spur the economy into recovery.
For example, the government has committed another $30 billion to GM to fund operations during its reorganization, on top of the initial $19.4 billion that the government has already invested in the Detroit automaker.
"The buying of General Motors and another $30 billion dollars to finance GM's bankruptcy is just the latest in nonstop spending that is shaking the confidence in the fate of the U.S.; credit rating," said Phil Flynn, senior market analyst at Alaron Trading, in a daily research note. "This increased fear of hyper inflation is leading to historic moves in commodities."
Gasoline: Crude prices have doubled since the end of 2008, and as oil prices have surged, so have gas prices. For consumers, the silver lining to the recession was cheap gas. But for the past 34 consecutive days, the pain at the pump has increased.
The national average price for a gallon of regular unleaded gasoline increased to $2.512, up 1 cent from the previous day's price of $2.502, according to according to motorist group AAA.
In the last 34 days the average price of gas has increased 46.4 cents, or 22.6%. The average price of a gallon of gas is down $1.60, or 38.9%, from the record high price of $4.114 that AAA reported on July 17, 2008. 
