Oil futures settled above $61 a barrel Friday and finished 40 percent higher than they started in 2005, capping a tough year for energy...

Share story


NEW YORK — Oil futures settled above $61 a barrel Friday and finished 40 percent higher than they started in 2005, capping a tough year for energy consumers but a great one for the petroleum industry as prices soared amid strong demand and tight supplies.


For similar reasons, there was an even sharper advance in 2005 in the price of natural gas, which surged more than 80 percent, making it extra expensive to produce electricity, manufacture goods and heat homes.


Many analysts think the average price of oil will be less than $60 in 2006, but not by much as U.S. and Chinese economic growth continues and OPEC members express growing interest in a production cut, perhaps as early as the first quarter.


“Because of China, oil is never going to go to the $18 to $22 level again in our lifetime,” said Mike Fitzpatrick, a broker at Fimat USA in New York. “But it certainly doesn’t have to be $60.”


Fitzpatrick thinks average oil prices will be closer to $50 a barrel in 2006, an outlook predicated on a slowdown in economic growth in the second half of the year — because of high energy prices. “At some point, this has to have a deleterious economic effect,” said Fitzpatrick, whose price outlook is more bearish than many of his peers.


While unthinkable just a few years ago, a price near $50 a barrel would actually be welcome news to energy-intensive industries such as airlines and trucking companies, who have retooled their operations to use fuel more efficiently.


There are signs that some homeowners and motorists are also making small changes to keep their energy consumption in check, though analysts say demand is still on the rise and that the tight supply of refining capacity in the U.S. is likely to boost the country’s dependence on imports and keep pump prices high.


Average retail-gasoline prices in the U.S. surged to record territory above $3 a gallon after Hurricane Katrina, which knocked out refineries and caused power failures that disabled pipelines that carry motor fuel from the Gulf Coast to the Northeast and Midwest. Now, the average retail price of gasoline nationwide is $2.19 a gallon, or 41 cents higher than a year ago, but analysts say the $3 level could be within reach again by summer.


The high price of fuel was a boon to major oil companies such as Exxon Mobil and BP. Their rising profits and stock prices caught the attention of Congress, which held hearings to implore the industry to boost production.


But oil analysts agree that the world’s largest petroleum producers are pumping as much as they can to take advantage of the high price, leaving little excess production capacity available if there is a prolonged supply disruption. The mere threat of lost output, whether because of geopolitical strife in Nigeria or Iraq, or a hurricane in the Gulf of Mexico, will be enough to keep the market on edge in 2006.


“It won’t take much to up the price again next year,” said London-based oil analyst John Hall of John Hall Associates.


“My guess is that OPEC is committed to holding up the price” at present levels, Hall said.


In 2005, Nymex oil futures averaged $56.70, an increase of 37 percent from 2004, when they averaged $41.47.


On Friday, light sweet crude for February delivery rose 72 cents to settle at $61.04 a barrel on the New York Mercantile Exchange, which closed at 1 p.m. in a shortened session ahead of the New Year’s holiday weekend. Nymex trading will resume Tuesday.


Natural gas, which briefly topped $15 per 1,000 cubic feet earlier this month, has been under pressure lately amid forecasts of mild weather in much of the United States.


On Friday, natural-gas futures inched 0.2 cent higher to settle at $11.225, up 83 percent on the year. On Thursday, the Energy Department said domestic storage of natural gas stood at 2.64 trillion cubic feet on Dec. 23.


That is 8 percent below year-ago levels and 1 percent above the five-year average for this time of year.


Heating-oil futures rose 2.51 cents to $1.728 per gallon, while gasoline futures gained 5.76 cents to $1.71 a gallon.


The price of Nymex crude is about 14 percent below its Aug. 30 high of $70.85. Oil prices remained above $60 a barrel for months after Katrina disrupted Gulf of Mexico oil and natural-gas output.


Associated Press reporter George Jahn in Vienna contributed to this report.