Oil settles above $129 for first time
NEW YORK (AP) - May 20, 2008 The June contract for light, sweet crude traded as high as
$129.58 on the New York Mercantile Exchange before settling back to
$129.12, up $2.07. The imminent expiration of the June contract
created additional volatility in the market, and raised the very
The June contract for light, sweet crude traded as high as
Crude prices spiked to a yet another trading high Tuesday as
supply concerns mounted and traders poured in for a last-minute
buying binge. At filling stations across the country, the national
average price for a gallon of regular gasoline approached $4,
touching $3.80 for the first time.
The June contract for light, sweet crude traded as high as
$129.60 on the New York Mercantile Exchange before settling at
$129.07, up $2.02 from Monday's record high. The imminent
expiration of that contract, which ended with the close of
Tuesday's trading, created additional volatility in the market.
"I keep making projections, and they keep turning out to be too
low, especially in the crude market," said Darin Newsom, senior
analyst at market analysis provider DTN. "We're already pushing up
against $130. If we clear that, there's no reason to believe crude
oil can't get to $140."
Oil's march to new highs coincided with the Labor Department's
report of an unexpectedly sharp rise in wholesale inflation last
month. The combination raised fears that inflation will slice into
Americans' discretionary spending, and that sent stocks falling
sharply on Wall Street.
Retail fuel prices also continued to shatter records, pressuring
drivers looking forward to road trips this weekend. The national
average price for a gallon of regular gasoline is now $3.80 on the
nose, according to AAA and the Oil Price Information Service,
meaning gas prices are up about 19 percent from this time last
year.
Diesel jumped nearly 2 cents overnight to a record $4.54 a
gallon.
Oil futures are now selling for about twice what they were just
a year ago. Prices have been propelled by a number of factors,
including worries about insufficient supply, soaring global demand
and a sliding dollar that has made oil cheaper for some buyers
overseas. Speculative buying has also helped push prices higher,
analysts say.
Industry observers in recent days have also pointed to
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 country also seems to be ramping up diesel imports ahead of the
Olympic games, analysts say, driving up prices.
"It's turning into a more defined demand for diesel fuel ahead
of the Olympics," said Jim Ritterbusch, president of oil trading
advisory firm Ritterbusch & Associates in Galena, Ill. "They
appear to stockpiling."
DTN's Newsom said that trend is likely to continue at least
through the beginning of the games, which run from Aug. 8 to 24.
"China going into the Summer Olympics is putting its best face
forward. They're going to continue to bring in diesel for their
power plants are going to have plenty on hand," Newsom said.
"What's going to happen after that, we don't know."
Crude's latest surge comes after OPEC's president reportedly
said the cartel won't increase its output before its next meeting
in September, adding to concerns about global supply.
The contract reached a new closing high of $127.05 Monday after
Algerian Energy Minister Chakib Khelil, the current president of
the Organization of Petroleum Exporting Countries, was quoted by a
government newspaper as saying OPEC won't increase its output
before its next meeting on Sept. 9.
The front-month crude contract has hit trading or closing
records - if not both - in 10 of the last 12 sessions.
The rally has helped drag the price of refined fuels higher as
well. Futures for heating oil, which is used as a proxy for the
price of diesel, and gasoline both set new records Tuesday.
Heating oil futures jumped almost a dime to settle at $3.775 a
gallon, after earlier rising to a record $3.792, while gasoline
futures added 6.78 cents to settle at $3.3044 a gallon, just short
of the intraday high of $3.3085. In other Nymex trading, natural
gas futures jumped 39.1 cents to $11.345 per 1,000 cubic feet.
In London, Brent crude for July delivery added $2.39 to $127.45
on the ICE Futures Exchange.