Oil spikes at $102 a barrel
NEW YORK (AP) - February 27, 2008 Prices nonetheless remained within range of Tuesday's record
close as the dollar tumbled to fresh lows against the euro and U.S.
economic worries drove more money into energy futures as a hedge
against inflation.
"This is a market that has been trending strongly to the
upside, ignoring fundamentals, and focusing on other factors,"
said Tim Evans, an energy analyst at Citigroup Global Markets.
Light, sweet crude for April delivery fell 12 cents to $100.76
on the New York Mercantile Exchange, after surging as high as
$102.08 a barrel in electronic trading earlier. The contract on
Tuesday jumped $1.65 to settle at $100.88 a barrel, a record.
"It's not about the gas inventories, it's not about the
seasonality," Evans added. "Traders are buying and selling on
other theories of valuation. They are not looking at how oil supply
compares with oil demand."
Meanwhile, gasoline prices at the pump jumped a penny overnight,
rising to an average of $3.152 from $3.142, according to AAA and
the Oil Price Information Service. A year ago, drivers were paying
an average of just $2.37 for a gallon of gas.
The report by the Energy Department's Energy Information
Administration showed U.S. crude oil inventories rose by 3.2
million barrels, or 1 percent, to 308.5 million barrels. Although
that number is slightly lower than levels a year ago, it is well
ahead of the 2.4 million barrel gain analysts had been expecting,
according to a survey by Dow Jones Newswires.
It was the seventh straight week the report showed a rise in
crude inventories, suggesting the U.S. at least has more than
enough oil to meet demand. Data showed gasoline inventories also
jumped more than expected - by 2.3 million barrels to 232.6 million
barrels. Analysts had expected a more modest rise of 400,000
barrels. Refinery activity also increased much more than expected.
Jim Ritterbusch, president of energy consultancy Ritterbusch and
Associates in Galena, Ill., said the report ought to send a bearish
signal to the market. But, he added, traders have found other
reasons to push prices up in the face of previous bearish reports.
"The initial response to the downside from this report could be
easily reversed by day's end," he said.
Traders seemed to focus largely on the slumping dollar, which is
increasingly driving investors to oil and other commodities to
protect against inflation. The 15-nation euro jumped a record $1.51
against the greenback, ensuring that crude will remain a relative
bargain for buyers overseas.
Negative economic news continued Wednesday when the Commerce
Department reported that new factory orders for big-ticket
manufactured goods tumbled 5.3 percent in January. The
worse-than-expected drop was the indicator's biggest decline in
five months.
On Capitol Hill, Federal Reserve Chairman Ben Bernanke warned of
sluggish business growth ahead, and signaled a willingness by the
central bank to cut interest rates again. But Bernanke also noted
that the Fed must keep a close watch on inflation given the sharp
rise in energy prices and other costs.
"You're looking at ... the use of the crude market as a hedge
for inflation, while at the same time crude has been the source of
inflation," Evans said. "As long as that feedback loop is in
place, then prices could conceivably continue to push higher even
though there's plenty of crude oil and plenty of gasoline."
Oil prices are still within the range of inflation-adjusted
highs set in early 1980. Depending on how the adjustment is
calculated, $38 a barrel then would be worth $96 to $103 or more
today.
In London, Brent crude fell 48 cents to $98.99 a barrel on the
ICE Futures exchange, below the intraday record of $100.30 a barrel
set earlier in the session.
In other Nymex trading Wednesday, heating oil futures fell 1.5
cents to trade at $2.7997, while gasoline futures fell by 4.7 cents
to $2.5035.
Natural gas futures lost more 17 cents, fetching $9.035 per
1,000 cubic feet.