NEW YORK (AP):
Crude oil prices climbed more than US$2 per barrel Monday on the back of expectations that the Federal Reserve will continue cutting interest rates. The rally in crude helped pull retail gasolene prices into record territory.
The gains in crude on the New York Mercantile Exchange were also supported by comments from OPEC suggesting the cartel plans no production increases.
Crude's gains helped pull gasolene higher, as did a growing belief that gasolene supplies are falling as summer driving season in the US approaches. Analysts say refiners have cut back on gasolene production due to low profit margins; the rising price of crude means it costs them more to refine gas.
And last week, the Energy Information Administration said gasolene inventories fell more than expected during the week ended March 28. Gasolene demand rose for the first time since January, raising the prospect that supplies will fall further as Americans drive more during the spring and summer.
"It's very normal that you see the ratcheting up of (gasolene prices) before its season," said Stephen Schork, an energy trader and analyst in Villanova, Pennsylvania.
May gasolene futures rose 2.68 cents to settle at US$2.7835 a gallon on the NYMEX, while at the pump, the national average for a gallon of gasolene jumped 3.6 cents over the weekend to a record US$3.339 per gallon, according to AAA and the Oil Price Information Service. That is 58 cents per gallon higher than a year ago.
The Energy Department expects retail gas prices to peak above US$3.60 a gallon later in the spring, said Guy Caruso, head of the department's Energy Information Administration, according to Dow Jones newswires. Many analysts see prices peaking closer to US$4 a gallon.
Despite last week's increase, Caruso expects demand for gasolene to fall by 85,000 barrels a day this summer, compared to last, due to high prices and the weak economy, Dow Jones reported. That would be the first summertime decline in gasolene demand since 1991.
To date, however, falling demand has failed to deflate surging gas prices, which are putting more pressure on consumers already suffering from higher food prices, falling home values and a tight job market.
One of the factors pushing food prices higher is diesel fuel, which is used to transport most of the world's food, industrial and consumer goods. Diesel prices, while holding above US$4 a gallon, have retreated lately, and fell 1.5 cents overnight to a national average of US$4.007.
Highest settlement
In oil trading on Monday, May futures rose US$2.86 to settle at US$109.09 a barrel on the Nymex, crude's highest settlement since March 18, as traders shrugged off a slightly weaker dollar and bet that future Fed rate cuts will weaken the greenback. A weak dollar attracts investors to hard commodities such as oil, which are seen as a hedge against inflation. Also, a falling dollar makes oil cheaper to investors overseas.
The prospect that the Organisation of Petroleum Exporting Countries will hold production steady this year also pushed oil prices higher Monday.
Oil futures are nearing last month's trading record of US$111.80 a barrel after a swoon that twice brought them briefly below US$100.
In other Nymex trading Monday, May heating oil futures rose 9.22 cents to settle at US$3.0843 a gallon, while May natural gas futures rose 46.9 cents to settle at US$9.791 per 1,000 cubic feet. Analysts said heating oil and natural gas futures were boosted by forecasts for cooler weather over the next two weeks.
In London, May Brent crude rose US$2.24 to settle at US$107.14 a barrel on the ICE Futures Exchange.
