Oil prices continue climb, pass $134
Can anything stop runaway oil prices? With prices for crude oil and gasoline setting new records on a daily basis, many market watchers...
The Associated Press; The Associated Press
NEW YORK — Can anything stop runaway oil prices?
With prices for crude oil and gasoline setting new records on a daily basis, many market watchers are beginning to wonder whether anything can stop energy's upward momentum — especially after oil futures not only passed $130 Wednesday for the first time, but kept going and shot past $134.
Gasoline, meanwhile, now costs more than an average of $3.80 nationally, is over $4 in many parts of the country and expected to keep following oil higher. In the Seattle area, regular gas was priced at $3.91 on Wednesday, according to AAA.
There are technical signals in the futures market, including price differences between near-term and longer-term contracts, that crude may soon fall. But with demand for oil growing in the developing world, and little end in sight to supply problems in producing countries such as Nigeria, few analysts are willing to call an end to crude's rally.
Oil's Wednesday rally was fed, in part, by a report from the Energy Department's Energy Information Administration, which said crude inventories fell by more than 5 million barrels last week. Analysts had expected a modest increase.
Light, sweet crude for July delivery rose $4.19 to settle at $133.17 a barrel on the New York Mercantile Exchange, but prices rose as high as $134.42 in after-hours electronic trading. It was crude's largest one-day price advance since March 26.
Investors seized on the inventory report to boost prices Wednesday, but traders interested in pushing prices higher are increasingly picking and choosing which news they wish to pay attention to, analysts say.
"Even if this report was bearish, with the momentum the way it is right now, it wouldn't matter," said Phil Flynn, an analyst at Alaron Trading.
Crude prices first passed $130 overnight on concerns about demand and a weaker dollar. Analysts say crude has been boosted in recent days by especially strong demand for diesel in China, where power plants in some areas are running desperately short of coal and certain earthquake-hit regions are relying on diesel generators for power.
The dollar, meanwhile, weakened against the euro. Investors see commodities such as oil as a hedge against inflation and a weak dollar and pour into the crude-futures market when the greenback falls. A weak dollar also makes oil less expensive to buyers dealing in other currencies.
Many investors think the dollar's protracted decline over the past year has been the most significant factor behind oil's rise from about $66 a barrel a year ago to today's highs.
Gas prices are 60 cents higher than a year ago, and many forecasters think they'll hit $4 on a national basis at some point over the next month.
"That's a fait accompli at this point," said Linda Rafield, senior oil analyst at Platts, the energy-research arm of McGraw-Hill.
Prices are already that high in many parts of the country, and the number of stations charging $4 or more rises each day. Prices are nearing $5 a gallon in parts of Alaska.
Diesel fuel rose 1.9 cents to its own record of $4.558 a gallon Wednesday. Rising prices of diesel, used to transport most consumer and industrial goods, are sending prices of food and other goods higher.
There are signs that high prices are cutting demand for gasoline, which fell slightly over the past four weeks and has been mostly lower since January, according to EIA data.
Only serious "demand destruction," a jump in supplies from Nigeria or other oil-producing nations or a jump in gasoline output by U.S. refiners could stop prices from continuing to rise, Rafield said.
There is little sign that demand will fall any time soon in fast-growing China, India and the Middle East, she said.
Associated Press reporters Pablo Gorondi in Budapest and Thomas Hogue in Thailand contributed to this story.
Copyright © 2008 The Seattle Times Company
UPDATE - 09:46 AM
Exxon Mobil wins ruling in Alaska oil spill case
UPDATE - 09:32 AM
Bank stocks push indexes higher; oil prices dip
UPDATE - 08:04 AM
Ford CEO Mulally gets $56.5M in stock award
UPDATE - 07:54 AM
Underwater mortgages rise as home prices fall
NEW - 09:43 AM
Warner Bros. to offer movie rentals on Facebook
Furniture & home furnishings
$450 - 2 Day Data Science with R, Python, S...
$450 - 2 Day Jump Start in BigData, Hadoop,...
POST A FREE LISTING