Pain at the pump: Oil hits new six-month high
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Just in time to ruin Memorial Day weekend, oil has jumped to a fresh six-month high today after the government reported a second straight week of falling U.S. inventories.
Near-term crude futures in New York were up $2.50 to $62.15 a barrel at about 12:30 p.m. PDT. The price has leaped from about $40 in early March.
At the pump, gas prices have jumped in the last three weeks, partly because of seasonal issues. The average pump price in California surged 18.4 cents in that period, to $2.524 a gallon as of last week, government data show. The latest bump in crude will just keep the pressure on.
Oil rose in March and April even as U.S. stockpiles continued to grow, reaching their highest levels since 1990. Traders said the market was looking past swelling inventories to a potential rebound in demand later this year if the economy improved.
Now the bulls still are betting on a better economy -- and their case is getting help from the inventory reversal and other factors.
From Bloomberg News:
Stockpiles dropped 2.11 million barrels to 368.5 million in the week ended May 15, according to the Energy Department. A 400,000-barrel decline was forecast, according to a Bloomberg News survey. Gasoline supplies plunged 4.34 million barrels, more than three times what was forecast, to 204 million. ‘The big drops in both crude and gasoline are very bullish,’ said Nauman Barakat, senior vice president of energy at Macquarie Futures USA in New York. ‘If people were surprised by how fast crude oil moved from $50 to $60, they will be really shocked by how quickly the market will hit $70.’
Three other forces pushing oil higher: The dollar has been sliding in recent weeks, which underpins commodity prices by making hard assets look more attractive; new unrest in Nigeria is threatening oil supplies there; and at least two U.S. refineries have been disrupted by minor fires in recent days.
All of this is taking the pressure off OPEC to make additional output cuts, despite still-weak global demand. The cartel’s leaders will meet May 28.
‘The price is telling OPEC that they don’t have to make a further cut,’ Rick Mueller, a director of oil markets at Energy Security Analysis in Wakefield, Mass., told Bloomberg.
At the same time, he said, ‘High prices may lead more OPEC members to exceed their production quotas.’
-- Tom Petruno