Oil prices briefly surpassed $55 a barrel yesterday and settled at their highest level since late October. The recent rally — crude...
Oil prices briefly surpassed $55 a barrel yesterday and settled at their highest level since late October.
The recent rally — crude futures are up more than $10 since the year began — reflects concerns that the world’s petroleum supply is being stretched thin by strong economic growth, though some traders are, nevertheless, stunned by the commodity’s rapid advance.
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With gasoline futures also rising, analysts said consumers should expect the average pump price, now $1.93 per gallon, to climb in the weeks ahead.
The weak dollar and the apparent unwillingness of the Organization of Petroleum Exporting Countries to pump more oil have contributed to the latest run-up in crude futures, which are now 52 percent above year-ago levels. However, analysts and brokers say speculative buying by hedge funds and others is magnifying the move higher.
“About the only way to explain this rally in the market is fund buying,” said James Cordier, president of Liberty Trading Group in St. Petersburg, Fla. “They’re pushing the market higher while producing nations are sitting on their hands and smiling ear to ear. This is incredible.”
Analysts said that while crude futures could rise further they do not expect prices to remain at these heights for very long. Eventually, producers and refiners seeking to lock in future profits will sell into the market, they said.
That said, with the spring and summer driving season around the corner, analysts think prices will remain well above $40 a barrel in the months ahead.
After climbing as high as $55.20 a barrel, light, sweet crude for April delivery settled at $53.57 on the New York Mercantile Exchange, an increase of 52 cents. The record close set on Nymex last October was $55.17, though prices would have to surpass $90 per barrel to meet the inflation-adjusted peak set in 1980.
“This is especially bad news for consumers, given the fact that gasoline prices have risen from early March to the middle of May in 19 of the last 20 years,” said energy analyst Peter Beutel of Cameron Hanover.