Price of Crude Oil Reaches New High of $65

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Crude oil in New York surged to a record $65 a barrel as refinery shutdowns and rising demand cut fuel inventories for the sixth straight week. Gasoline and heating-oil futures also touched all-time highs.


Gasoline consumption was up 1.4% for the four weeks ended August 5 compared with the same period a year earlier, the U.S. Energy Department said yesterday in a weekly report. Gasoline supplies fell 2.1 million barrels to 203.1 million barrels last week. The rate at which refineries operated declined.


“At the retail level we haven’t seen a slackening in demand,” a spokesman for the National Association of Convenience Stores, a trade organization based in Alexandria, Va., Jeff Lenard, said. Motor fuel sales at convenience stores rose 19% to $262.6 billion last year.


Crude oil for September delivery surged $1.83, or 2.9%, to close at $64.90 a barrel on the New York Mercantile Exchange. Futures touched $65 a barrel minutes before floor trading ended. Prices are 46% higher than a year ago. The Nymex contract began trading in 1983.


The average pump price for gasoline in America rose 2.2 cents to a record $2.376 a gallon on Tuesday, according to the AAA, the former American Automobile Association. Prices are up 27% from a year earlier.


As retail prices rise, some motorists are buying lower grades of cheaper gasoline, Mr. Lenard said. “Consumers are doing anything they can to make a difference in how much they’re spending, short of using less.” The association represents about 2,000 companies. Convenience stores sell about three-quarters of all gasoline bought in America, the group says.


“We haven’t seen demand respond to higher prices yet,” an oil analyst at Morgan Keegan, Subash Chandra, said. “We are following the normal law of economics. Prices will rise until we choke demand off to meet falling supply,” he said.


In London, September Brent crude oil futures reached a record $64.20 during the session. Prices rose $2.01, or 3.2%, to close at $63.99 a barrel on the International Petroleum Exchange. Brent trading began in 1988.


Adjusted for inflation, oil was more expensive during the 1970s.


Prices rose from 1979 through 1981 after Iran cut oil exports. The average cost of oil used by American refiners was $35.24 a barrel in 1981, according to the Energy Department, or $75.44 in today’s dollars.


The decline in gasoline stockpiles overshadowed an unexpected rise in crude-oil inventories. Oil supplies rose 2.8 million barrels to 320.8 million last week, the government reported. Stockpiles were expected to fall 1 million barrels, according to the median estimate of 10 analysts surveyed by Bloomberg.


Oil imports rose to 11.1 million barrels a day last week, the highest in a year, and the second-highest ever. Refineries operated at 95% of capacity, down 0.8 percentage point from the previous week.


“We’ve seen a slowdown in refinery utilization tied to outages and that allowed crude oil to” increase, an economist at Wachovia, Jason Schenker, said. “Higher imports also helped.”


Refinery units at Chevron, BP PLC, Valero Energy, Exxon Mobil, Sunoco, and ConocoPhillips had unplanned shutdowns in recent weeks.


“It looks like the gasoline markets are still quite tight,” Brian Hicks, who helps oversee $565 million at U.S. Global Investors in San Antonio, said. “At first glance, it’s somewhat bearish if you look just at the build in crude oil inventories.”


Supplies of gasoline are down 2.5% compared with the week ended August 6, 2004, according to government figures.


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