Oil prices climbed yesterday and briefly surpassed $60 a barrel, a level economists described as a worrisome, though not alarming, sign...
The Associated Press
WASHINGTON — Oil prices climbed yesterday and briefly surpassed $60 a barrel, a level economists described as a worrisome, though not alarming, sign for global financial growth.
Energy traders said a tropical storm in the Gulf of Mexico was the leading factor behind yesterday’s rally.
Last year, Hurricane Ivan hampered the region’s oil production and refining; brokers are worried that a similar event could reduce supplies again.
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Tropical Storm Cindy isn’t expected to significantly disrupt supply or do any damage, but general anxiety about the hurricane season is still “causing a little bit of pressure in the market,” said oil analyst Carl Larry at Barclays Capital in New York.
Another reason prices are moving higher at the start of the third quarter is institutional investors who took profits in May and June are buying energy futures once again, Larry said.
“That’s the speculative interest in the market,” he said.
After reaching as high as $60.10 a barrel in trading on the New York Mercantile Exchange yesterday, light sweet crude for August delivery closed up 84 cents at $59.59.
While consumers and businesses have proved to be quite resilient despite the doubling of oil prices over the past two years, economist John Silvia at Wachovia Securities said, “It’s getting harder and harder to offset those $10 [per barrel] gains.”
Silvia said low interest rates mitigate the impact of higher fuel costs by making it easy for companies and families to borrow money.
But he thinks hiring and consumer spending will eventually suffer more noticeably if oil prices remain at these levels.
Economist Nariman Behravesh at Global Insight said $60-a-barrel oil “will further slow economic growth in the United States and worldwide, but not by a lot.”