Oil price smashes another record
NEW YORK (AP) - April 18, 2008 Inventories of gas fell by 5.5 million barrels last week,
according to the Energy Department's Energy Information
Administration, a much bigger decline than forecast by analysts
surveyed by Dow Jones Newswires. Light, sweet crude for May
delivery responded by rising as high as $115.07 on the New York
Mercantile Exchange, and later settled up $1.14 at a record $114.93
a barrel.
The report said crude inventories fell by 2.3 million barrels
last week, compared to the gain analysts expected.
Oil prices were also boosted by the falling dollar, which
declined to a new low against the euro on Wednesday. Many investors
buy commodities such as oil as a hedge against inflation and a
falling greenback. A weaker dollar also makes oil cheaper to
investors overseas.
But the market was torn and traded sharply lower at times due to
data deeper in the report showing that the country's appetite for
increasingly expensive gas is declining.
"Demand for gasoline is terrible," said Phil Flynn, an analyst
at Alaron Trading Corp. in Chicago. Gas demand has fallen an
average of 1 percent each of the last four weeks compared to the
same period last year. "Demand should be rising this time of
year."
The EIA report also said inventories of distillates, which
include heating oil and diesel, unexpectedly rose last week by
about 100,000 barrels. Analysts had expected a sharp decline. May
heating oil futures rose 0.91 cent to settle at $3.283 a gallon.
Demand for gasoline has been falling for months as consumers
reacted to a series of price records by driving less. The national
average price of a gallon of regular unleaded gas rose 1.3 cents
Wednesday to a record $3.399 a gallon, according to a survey of
stations by AAA and the Oil Price Information Service. That's 53
cents higher than a year ago, and is expected to keep climbing
along with futures prices and as the summer driving season draws
near.
The average national price of a gallon of diesel, meanwhile,
rose a cent to a record $4.129 a gallon, the survey showed. High
prices for diesel - used to fuel most trucks, trains and ships - is
a large part of the reason food prices are rising.
Gas and diesel prices are following crude futures, which have
risen from about $64 a barrel last spring, mostly because of the
falling dollar. Prices also have been supported in recent months by
a view that demand for oil remains strong globally, although it may
be falling in the United States. But that could change, if U.S.
demand continues to weaken, analysts say.
"We're seeing a major slowdown in U.S. demand growth," Flynn
said.
Still, analysts expect gas prices to rise higher before they
fall. Many see retail prices peaking around $3.65 a gallon next
month. The Energy Department, in a recent forecast, said prices
could average as high as $3.60 a gallon this summer on a monthly
basis, but could spike to $4 on a national average basis at times.
In other Nymex trading, May natural gas futures rose 22.8 cents
to settle at $10.433 per 1,000 cubic feet.