It seems like a paradox: Demand for oil, which almost always rises, is likely to drop by 3% in 2009-the worst decline in almost 30 years. Stockpiles are so high that an ocean of oil is building up around the world in tankers or in depots. Yet since hitting a low of $34 per barrel on Feb. 12, the price of light, sweet U.S. crude has more than doubled, to $71 per barrel. Why are prices soaring? OPEC officials and oil traders say that market sentiment has changed dramatically. Investors, who dumped oil last fall, are no longer deterred by the prospect of a glut. Instead, with extreme pessimism about the world economy giving way to cautious optimism, markets are reverting to last year's worries about future supply shortages.
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