Oil prices rallied to a record close above $57 a barrel yesterday, sparked by a surge in gasoline futures that could send the average retail...
Oil prices rallied to a record close above $57 a barrel yesterday, sparked by a surge in gasoline futures that could send the average retail cost of gasoline above $2.25 a gallon within a few weeks.
Analysts said the nearly $2-a-barrel run-up in oil prices suggested there is new money coming into the market from hedge funds and other speculators, as well as from commercial players, such as airlines and fuel distributors, that are trying to lock in prices now out of fear that the upward trend may continue.
Another factor appeared to be an investment-bank report that said strong demand and tight supplies could cause a “super spike” that will push oil prices above $100 a barrel.
After climbing as high as $57.70 a barrel, a new intraday high, light, sweet crude for May delivery settled at $57.27 a barrel on the New York Mercantile Exchange, an increase of $1.87.
Most Read Stories
- Man shot at UW no racist, friends insist, despite shooter’s claim
- We need real solutions to vehicle campers | Editorial
- Crowd comparison: Inauguration Friday and women's march Saturday
- Record Seattle crowd asserts women’s rights: 'Trump has galvanized everybody' WATCH
- Will Seahawks keep Luke Willson? That's among questions facing tight end position in offseason
The previous Nymex settlement high was $56.72 a barrel, set March 18. The previous intraday peak of $57.60 was set March 17.
Oil prices are 67 percent higher than a year ago, but still well below the inflation-adjusted high above $90 a barrel set in 1980.
Oil analyst Marshall Steeves of Refco Group in New York said the rally in fuel prices is “overdone.”
“I don’t think the sky’s the limit,” Steeves said. “At some point, there’ll be some impact on demand. But where that price is, is hard to determine.”
At the moment, gasoline demand is up about 2 percent from a year ago and the average retail price of unleaded gasoline is $2.15 a gallon, according to the Energy Department.
Yesterday, gasoline futures rose nearly 7 cents to settle at $1.731 a gallon, a Nymex record. Gasoline futures are up more than 15 cents, or 10 percent, over the past three days.
Tom Kloza, director of Oil Price Information Service, said the recent surge in gasoline futures means average U.S. pump prices are likely to rise above $2.25 a gallon within a few weeks.
However, Kloza added in an e-mail, “That’s not to say that the market is acting in a justified, dignified, and appropriate manner. It hasn’t been doing that for a while.”
Several analysts have been critical of an extremely bullish report that Goldman Sachs distributed to the media Thursday, saying it created unreasonable fear in the market. The report said that oil prices could go as high as $105 a barrel — the price Goldman Sachs said may be necessary to significantly curb energy consumption.
Goldman Sachs analyst Arjun Murti said factors contributing to the run-up in prices include geopolitical turmoil in oil-producing countries.
“Oil markets may have entered the early stages of what we have referred to as a ‘super spike’ period — a multiyear trading band of oil prices high enough to meaningfully reduce energy consumption and recreate a spare capacity cushion only after which will lower energy prices return,” the report said.
Other analysts said they would expect a slowdown in demand well before that point.
Oil analyst Victor Shum of Texas-based Purvin & Gertz in Singapore said the chances of crude oil reaching $105 a barrel were slim.
“It will take a confluence of many events to happen,” he said. “For example, if oil reserves in Saudi Arabia were significantly destroyed, then we could see a spike.”
Associated Press Writer Wee Sui Lee in Singapore contributed to this report