The price of crude oil hit yet another record on the last day of a tumultuous first half, spurting past $143 a barrel before ending lower...
NEW YORK — The price of crude oil hit yet another record on the last day of a tumultuous first half, spurting past $143 a barrel before ending lower on demand fears and a resilient dollar. Crude has shot up nearly 50 percent since the start of the year, in large part on the dollar’s troubles, and analysts expect that trend to remain intact as the second half of 2008 begins.
A government report lowering oil- and gasoline-demand estimates and a dollar hanging tough nullified investor concerns over supply, a fragile global economy and continued tensions in the Middle East.
“What this shows is that demand destruction in the U.S. is a lot larger than previously thought,” said Phil Flynn, an energy analyst at Alaron Trading in Chicago. “There are more signs that demand is deteriorating.”
Light, sweet crude for August delivery lost 21 cents to settle at $140.00 a barrel on the New York Mercantile Exchange (NYMEX). In early electronic trading, the contract hit a record $143.67.
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The Energy Information Administration reported that oil usage in April was lower than previously estimated, falling 4.2 percent to 19.768 million barrels per day from 20.631 million. That was 3.9 percent lower than in April 2007 and the lowest level for the month in six years.
The price of oil, which began 2008 at $96 a barrel, has risen in part on expectations of higher demand in China and other developing nations. But its almost relentless advance has also forced consumers and businesses to cut back the amount of gas and oil they use; it is also posing a threat to U.S. economic growth that could further slice into demand.
A hardier dollar also sent oil prices lower on Monday. Often, oil futures are used as a hedge against a weaker dollar.
But there was little expectation in the market that a turnaround in the dollar would send oil falling much further. The dollar has weakened on expectations the Federal Reserve Board won’t soon raise interest rates as the U.S. economy struggles with low growth. The Fed left its benchmark rate unchanged last week.
“If the Federal Reserve is powerless to raise interest rates because the economy continues to be soft, then we’ll see low interest rates push oil higher,” Alaron’s Flynn said.
Gasoline’s surge higher has clearly affected consumer spending in the U.S. The concern is that the inflationary effects of higher oil and gas will force consumers to cut back their spending on nonessentials further in the months ahead.
Geopolitical tensions, particularly surrounding Iran, also continue to boost oil prices. Traders were digesting comments from an Iranian general that if his country is attacked, it would strike back by barraging Israel with missiles.
Iran is the world’s fourth-largest oil exporter.
Global supply also remains a concern. The Iraqi government opened six oil fields to international bidding Monday as the nation attempts to boost daily production by 60 percent.