Oil passes $120, gas prices slip over a cent
NEW YORK (AP) - May 5, 2008 Supply threats that emerged overseas and a weaker dollar sent
light, sweet crude for June delivery to a new trading record of
$120.21 a barrel on the New York Mercantile Exchange before futures
retreated slightly to trade up $3.46 at $119.78.
Oil's sharp rise this year has driven gas prices to
unprecedented levels, prompting consumers to reconsider summer
vacation plans and limit daily excursions; they're also spending
less at malls and shopping centers because they're paying more not
just for fuel, but for all kinds of goods and services.
The mix of factors that drove oil to its latest record were a
microcosm of the forces that have nearly doubled oil prices from
their levels of about $62 a barrel one year ago. The dollar
weakened against the euro on Monday, attracting investors to
commodities such as oil which they see as a hedge against
inflation. Also, a falling dollar makes oil less expensive to
investors overseas. A series of Fed rate cuts starting last year
weakened the dollar considerably against foreign currencies;
analysts blame the dollar's protracted decline for oil's sharp rise
this spring.
Supply outages or threats emerged in Iraq, Nigeria and from Iran
on Monday; events in all three nations have caused prices to spike
many times in recent months.
On Monday, "the (oil) market is bolstered by news out of Iraq,
where Turkish forces have once again been involved in cross-border
raids against ... insurgents, and Nigeria, where rebels attacked
three oil wells and pipelines feeding (an) export terminal over the
weekend," said Addison Armstrong, director of market research at
Tradition Energy in Stamford, Conn., in a research note.
Kurdish rebels warned they could launch suicide attacks against
American interests to punish the U.S. for sharing intelligence with
Turkey after Turkey bombed rebel bases in Iraq on Friday. Oil
traders worry that any conflict in the Middle East will cut oil
shipments out of Iraq. Several previous incursions by Turkish
forces into Iraq have caused oil prices to rise.
In Nigeria, a Royal Dutch Shell PLC spokesman said attackers hit
an oil facility belonging to Shell's joint venture in southern
Nigeria and that some oil production has been shut down. Years of
unrest in Nigeria have cut off nearly a quarter of the major U.S.
supplier's oil output.
Also pushing oil prices higher Monday were concerns about Iran
after Supreme Leader Ayatollah Ali Khamenei said Sunday his country
will not bend to international pressure and give up its nuclear
program. Iran is the second largest producer in the Organization of
Petroleum Exporting Countries.
Beyond the occasional threats to crude supplies, global demand
for oil continues to grow. While demand for oil and gasoline has
been soft in the U.S., the Chinese and Indian economies are growing
by double digits, boosting global demand for oil.
At the pump, meanwhile, the average national price of a gallon
of regular gas slipped to $3.611 a gallon on Monday, down 1.1 cents
from Friday, according to AAA and the Oil Price Information
Service. Prices reached a record $3.623 a gallon on Thursday.
Diesel prices also fell, slipping to a national average of
$4.239 from a record $4.251 on Thursday. The runup in prices of
diesel, used to power most trucks, trains and ships, is one reason
why food prices are so high.
The slight relief motorists are seeing at the pump could end
quickly if oil's rise continues. Analysts say gas prices could
still go up another 10 cents or so. Indeed, Andy Lebow, senior vice
president at MF Global Inc., thinks the gas price declines of the
last four days are almost entirely due to crude oil's sharp drop
last week; prices fell from $119.93 on Monday as low as $110.30 on
Thursday before rebounding. Gas prices tend to follow prices in the
futures market, but with some lag.
In other Nymex trading Monday, June gasoline futures rose 7.27
cents to $3.0391 a gallon, and June heating oil futures rose 9.43
cents to $3.313 a gallon. June natural gas futures rose 36.9 cents
to $11.146 per 1,000 cubic feet.
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Associated Press Writers Yahya Barzanji in Iraq, George Jahn in
Vienna and Gillian Wong in Singapore contributed to this report.
