Oil Prices Continue Climb to Nearly $50 a Barrel

Would $50 crude start to chill the red-hot oil market?

Don’t count on it, analysts said, as oil prices jumped Monday to another record closing high just shy of $50 a barrel on the New York Mercantile Exchange.

Prices even briefly touched $50 a barrel in after-hours electronic trading as concern heightened that Nigeria, OPEC’s fifth-largest producer, is headed toward civil war and could see its oil exports disrupted.

Oil has soared this year because strong global demand for crude is running up against tight supplies, leaving traders skittish that any threat to worldwide production could upset that fragile balance and cause shortages.

Besides Nigeria, the market is concerned about the continued interruption of supplies through the Gulf of Mexico caused by Hurricane Ivan. About 29% of the region’s oil production is still shut down, the Interior Department’s Minerals Management Service said Monday.

The benchmark light crude oil for current delivery on the Nymex rose 76 cents to $49.64 a barrel, its highest point since the futures contract began trading there 21 years ago. Its previous closing high was set Friday.

Prices have soared 53% this year and have gained $6.06 a barrel, or 14%, in just the last eight sessions. If adjusted for inflation, crude prices remain well below the record highs reached in the early 1980s, which would equal $80 a barrel or more in today’s terms.

Even so, the price increase helped push the stock market lower Monday, with the Dow Jones industrial average closing below 10,000 for the first time since mid-August. The blue-chip average fell 58.70 points, or 0.58%, to 9,988.54.

High crude prices also continue to underpin historically high gasoline prices. The average pump price for self-serve regular gasoline in California rose 3.7 cents to $2.094 in the week ended Monday, the Energy Department’s Energy Information Administration said in its weekly survey. The price stands 18.2 cents a gallon higher than a year ago.

Nationwide, the average price climbed 5.1 cents to $1.917 a gallon. Gasoline prices also soared in the hurricane-affected Gulf Coast. The average price in Houston, for instance, shot up 7 cents a gallon to $1.783, leaving it nearly 35 cents higher than a year ago.

Now, the question is whether the latest price run-up will end when crude closes above $50 a barrel, or whether the forces pushing prices higher are strong enough to keep them rising.

The $50-a-barrel level “is an important psychological marker, just as $40 a barrel was,” said Steve Enger, an analyst at energy investment firm Petrie Parkman & Co. in Denver. “But it is, in a sense, just another number.”

Chris Ross, an energy vice president at consulting firm Charles River Associates in Boston, said a drop in crude prices wouldn’t come until there was “something in the fundamentals that changes people’s perceptions” about oil’s supply and demand.

Possible triggers, Ross noted, include slower economic growth in the United States and other industrialized nations, stability in Nigeria and a marked drop in gasoline consumption.

Conversely, further unrest in Nigeria and other oil-exporting nations, or an early cold snap in the Northeast, would be events that could send oil prices still higher, Ross said.

The Organization of the Petroleum Exporting Countries, which pumps about one-third of the world’s oil, has boosted production this year in a bid to calm the markets. But now the cartel is pumping nearly flat-out, with little spare capacity to boost supplies on its own.

If reports due later this week show a continued drop in U.S. inventories of oil, that could keep prices firm as investors worry about shortages.

But Jacques Rousseau, an analyst with investment firm Friedman Billings Ramsey & Co. in Arlington, Va., said October is a month in which oil supplies often swell and the market settles down.

Demand for gasoline and jet fuel tends to slip in October, and the coldest months -- prompting demand for heating oil -- have yet to arrive. That enables oil inventories to build, Rousseau pointed out.

Yet he cautioned that refiners weren’t anxious to buy extra oil at today’s prices just to create a supply cushion.

“They’re running more of a just-in-time type of inventory system,” Rousseau said, buying only the oil they currently need because refiners don’t want to get stuck with $50 oil if the price suddenly drops.

Times wire services were used in compiling this report.