Oil prices top $70

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NEW YORK (CNNMoney.com) -- Oil topped $70 a barrel Monday, tracking an advance on Wall Street.

Crude oil for November delivery rose 46 cents to settle at $70.41 a barrel, bouncing back after falling to near $69 in midday trading.

"The price action is more related to the sentiments in the equity market than anything else," said Chris Lafakis, economist at Moody's Economy.com.

After a two-week selloff that took Wall Street down nearly 5%, stocks gained Monday on a better-than expected reading on the services sector of the economy and strong demand for the Treasury's first bond auction of the week.

Crude prices were also boosted by a weak dollar, which dropped against its trading partners. Crude oil, like other commodities, is priced in dollars, and a weaker greenback can help support prices.

In the near term, Economy.com predicts crude prices will stay in the range of $65-$70 a barrel, and prices will average $67.23 a barrel in the fourth quarter.

Lafakis said that investors are revisiting the fundamentals of the market. While rising equities and a weakening dollar drive oil prices higher, Lafakis believes the correlation will break down as it did in the first few days of October.

Rather, the recent supplies in the crude oil market have overwhelmed the amount that is being demanded. As oil prices have risen, OPEC member counties have been producing more oil, and a new field in Russia has also been boosting production.

At the same time, Lafakis said, U.S. refineries are operating at lower capacities than previous years. They will continue to cut production in the weeks ahead to boost margins.

"On the whole, people are still optimistic about the global economy next year. If you're an investor and you think the economy will pick up, it's harder to sell oil," Lafakis said. "While the mood has dampened in the past couple of weeks, it is still relatively optimistic."

While oil prices will be low at the start of 2010 as the unemployment rate peaks, Lafakis expects them to gradually rise in 2010 and reach $83.81 by the end of next year.