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Oil, gasoline break out to 18-month highs
Source: Agencies |
April 6, 2010, Tuesday
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NEW reports showing improvement in the housing and services sectors combined with encouraging employment data to send oil and gasoline prices to an 18-month high yesterday.
After months of trading in a range of US$75 to US$85, a recent rally driven by positive U.S. economic news has some analysts wondering if oil could make its first foray into triple digits since late 2008. But that's also raised concerns about an increase in gasoline prices that could hurt consumers just as they're starting to spend again.
Reports on pending home sales and the service sector came in better than expected yesterday. At the end of last week, the Labor Department said the U.S. posted its best growth in jobs in three years and its fastest growth in industrial activity since July 2004.
Benchmark crude for May delivery rose US$1.75 to settle at US$86.62 a barrel on the New York Mercantile Exchange. On Thursday, the contract climbed US$1.11 to settle at US$84.87. Global oil trading was closed for the Good Friday holiday.
Oil now appears to be in a new range that could go to US$95 or higher, according to oil trader and analyst Stephen Schork.
October 2008 was the last time oil rose above US$100. Adam Sieminski, chief energy economist for Deutsche Bank, said last week that he's worried that triple-digit oil would push the global recovery back into recession.
If China continues growing while oil supplies come down, "presumably you might be able to get US$100 per barrel," Sieminski said.
Gasoline prices tend to rise in spring as refineries produce more expensive blends to reduce smog in warmer weather. Rising oil prices could exacerbate that increase.
In its weekly report, the Energy Information Administration said yesterday that the national average pump price last week was US$2.83 a gallon, 79 cents higher than a year ago.
As prices approach US$3 per gallon (79 cents a liter), a mark many analysts expect gas will hit over the next few weeks, the worry is that motorists will cut back spending on fuel and elsewhere.
"It's a price where you start to see demand destruction begin to kick in," Schork said.
Not that motorists and American companies are using a lot of crude products now. Consumption of gasoline, diesel fuel, heating oil and jet fuel remains sluggish and markets are well supplied. The biggest sign of strength is from manufacturers who have boosted consumption as they fire up the nation's factories.
Gasoline prices that hit US$4.11 per gallon (US$1.08 a liter) in July 2008 helped push the U.S. into the worst recession in decades. Oil prices, which hit US$147 that month, fell to US$33 by December.
In other Nymex trading in May contracts, heating oil rose 5.08 cents to settle at US$2.2675 a gallon, and gasoline gained 2.65 cents to settle at US$2.3502 a gallon. Natural gas picked up 19.1 cents to settle at US$4.277 per 1,000 cubic feet.
In London, Brent crude added US$1.87 to settle at US$85.88 on the ICE futures exchange.
After months of trading in a range of US$75 to US$85, a recent rally driven by positive U.S. economic news has some analysts wondering if oil could make its first foray into triple digits since late 2008. But that's also raised concerns about an increase in gasoline prices that could hurt consumers just as they're starting to spend again.
Reports on pending home sales and the service sector came in better than expected yesterday. At the end of last week, the Labor Department said the U.S. posted its best growth in jobs in three years and its fastest growth in industrial activity since July 2004.
Benchmark crude for May delivery rose US$1.75 to settle at US$86.62 a barrel on the New York Mercantile Exchange. On Thursday, the contract climbed US$1.11 to settle at US$84.87. Global oil trading was closed for the Good Friday holiday.
Oil now appears to be in a new range that could go to US$95 or higher, according to oil trader and analyst Stephen Schork.
October 2008 was the last time oil rose above US$100. Adam Sieminski, chief energy economist for Deutsche Bank, said last week that he's worried that triple-digit oil would push the global recovery back into recession.
If China continues growing while oil supplies come down, "presumably you might be able to get US$100 per barrel," Sieminski said.
Gasoline prices tend to rise in spring as refineries produce more expensive blends to reduce smog in warmer weather. Rising oil prices could exacerbate that increase.
In its weekly report, the Energy Information Administration said yesterday that the national average pump price last week was US$2.83 a gallon, 79 cents higher than a year ago.
As prices approach US$3 per gallon (79 cents a liter), a mark many analysts expect gas will hit over the next few weeks, the worry is that motorists will cut back spending on fuel and elsewhere.
"It's a price where you start to see demand destruction begin to kick in," Schork said.
Not that motorists and American companies are using a lot of crude products now. Consumption of gasoline, diesel fuel, heating oil and jet fuel remains sluggish and markets are well supplied. The biggest sign of strength is from manufacturers who have boosted consumption as they fire up the nation's factories.
Gasoline prices that hit US$4.11 per gallon (US$1.08 a liter) in July 2008 helped push the U.S. into the worst recession in decades. Oil prices, which hit US$147 that month, fell to US$33 by December.
In other Nymex trading in May contracts, heating oil rose 5.08 cents to settle at US$2.2675 a gallon, and gasoline gained 2.65 cents to settle at US$2.3502 a gallon. Natural gas picked up 19.1 cents to settle at US$4.277 per 1,000 cubic feet.
In London, Brent crude added US$1.87 to settle at US$85.88 on the ICE futures exchange.
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