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Oil Prices Top $105, Defying Weak Economic Data

(Oil prices story updated for Wednesday trading activity)

NEW YORK ( TheStreet) -- Light sweet crude oil prices rose again Wednesday, for the third straight day, as the twin headline risks of Middle East geopolitical tensions and Japan's devastating earthquake and tsunami continue to dominate market sentiment and energy prices.

Light sweet crude settled higher by 0.7% on Wednesday, at $105.75, yet another new high mark for crude oil since its last previous peak in September 2008. Light sweet crude had surpassed the $106 mark earlier in Wednesday trading.

Brent crude was down by 0.1% on Wednesday, settling at $115.55.

The U.S. headlined the weak macroeconomic data on Wednesday, with a home-sales report that missed expectations by a wide mark, showing new-home sales plunging to a record low. On Tuesday, there had been weak macroeconimic headlines out of Europe, with Portugal and Irish bonds on the critical default watch list.

However, oil prices remains tethered primarily to the Middle East headlines, where violence and the Libyan conflict continue to support elevated prices.

U.S. military commanders talked about days of air strikes that would continue, and the U.S. and its allies continued to work out issues related to overall strategy and management of the Libyan bombing campaign.

Officials in Bahrain and Saudi Arabia continue efforts to quell public unrest. Six protesters were killed in Syria on Wednesday. Opposition groups in Yemen have called for major protests on Friday. In Israel, there was an explosion at a Jerusalem bus stop on Wednesday that Israeli police called a terrorist attack.

Japanese authorities announced on Wednesday that tap water in Tokyo had been contaminated by radioactive substances, and management of the nuclear crisis continued to present challenges.

Neither the Libyan conflict nor Japanese nuclear crisis indicate quick roads to resolution.

"We're still seeing the follow through from the Middle East with a protest in Yemen planned, and deaths in Syria, and from Japan, more complications on the nuclear front. And we're again seeing economic data that is horrific, with the home sales in U.S., but the market is just not focused on that," said Matt Smith, commodities analyst at Summit Energy.

The latest U.S. crude inventory reports indicate continued oil demand even at the elevated oil prices, as opposed to the demand destruction that is feared as gasoline nears $4 per gallon in the U.S.
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