Oil Prices Hit Record $75 a Barrel
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Oil prices jumped to a record above $75 a barrel yesterday, propelled by a rally in gasoline that analysts said could send average American pump prices past $3 a gallon by the weekend.
Recent snags in oil-shipping and refining along the Gulf Coast have raised traders’ concerns about motor-fuel supplies at a time when demand continues to rise despite soaring prices.The start of a new fiscal quarter also has brought more speculative money into the market, brokers said.
“Everybody thought we’d hit a price that would create permanent demand destruction. But demand for gasoline is rising,” an Alaron Trading Corp.analyst, Phil Flynn, said.” Once again the American public has shown its ability to get over paying high prices for gasoline.”
A protracted diplomatic standoff between the West and Iran, OPEC’s no. 2 oil supplier, has kept a high floor beneath prices, and analysts said geopolitical tensions were heightened further yesterday by North Korea’s test-firing of missiles.
Light sweet crude for August delivery briefly surged to $75.40 a barrel on the New York Mercantile Exchange before easing back to settle at $75.19, an increase of $1.26. Gasoline futures jumped by more than 5.7 cents to settle at $2.2758 a gallon, heating oil closed at $2.0626 a gallon, up 3.4 cents.
With refiners fetching the equivalent of $95 a barrel or more for gasoline – there are 42 gallons in a barrel – “one doesn’t have to be disciplined in the buying of crude,” an oil analyst at Oil Price Information Service in Wall, N.J.,Tom Kloza said.
The previous intraday record for front-month oil futures was $75.35, set on April 21. The previous record settlement for oil, $75.15, was set the same day.
Oil prices are now roughly 26% higher than a year ago, but still below all-time inflation-adjusted highs of around $90.
The average retail price of gasoline is $2.93 a gallon, according to OPIS. But Mr. Kloza said pump prices are likely to surpass $3 a gallon as early as this weekend.
American retail gasoline prices peaked at $3.07 a gallon, on average, last September, reflecting the extreme tightness in the market following Hurricane Katrina, which knocked out pipelines that deliver fuel to the East Coast and Midwest.
While oil prices are on the upswing, natural gas futures continue to head lower amid record levels of domestic supplies. Some analysts say domestic storage could reach its limits by the end of summer, forcing some producers to cap wells.Yesterday, August natural gas futures fell 33.9 cents to settle at $5.765 a 1,000 cubic feet – the lowest level since September 28, 2004.
But with global oil demand approaching 85 million barrels a day, traders are extremely nervous about the possibility of any supply disruptions, especially because there is less than 2 million barrels a day of spare production capacity, most of it in Saudi Arabia.