Oil and Gas Futures Go Even Higher
The price of oil raced above $55 a barrel and gasoline hit a record high Thursday as traders continued to fret about energy supplies despite plentiful U.S. inventories.
Oil’s latest jump came on top of two weeks of increases, which have already reached the pump. Los Angeles motorists have seen the average price of regular self-serve gasoline climb 4 cents in the last week to $2.236 a gallon, AAA reported. Analysts warn that more increases are on the way, courtesy of the oil markets.
“We don’t know how high it will go, but we don’t see any way it will go down,” said Carol Thorp, a spokeswoman for the Automobile Club of Southern California. “There doesn’t seem to be any good news on the horizon.”
U.S. light crude for April delivery zoomed to $55.20 a barrel before fading late in the day to settle at $53.57 a barrel, up 52 cents, on the New York Mercantile Exchange. Thursday’s trading high was just below the intraday trading record of $55.67 set Oct. 25. The record closing price for the U.S. benchmark grade of oil, reached twice in October, is $55.17 a barrel.
Gasoline futures soared to a record close for the second straight day, finishing Thursday up 2.37 cents, or 1.6%, to $1.508 a gallon on the Nymex.
Stubbornly high prices have created huge stockpiles of cash at major oil companies, fueling speculation that independents such as El Segundo-based Unocal Corp. could be snapped up by ChevronTexaco Corp. or another industry giant.
Oil and fuel markets are being driven by the underlying fear that supplies won’t be sufficient to satisfy the world’s voracious energy appetite.
Although an Energy Department report Wednesday indicated that U.S. inventories of oil and gasoline were running about 9% above last year’s levels, both the Energy Department and the International Energy Agency recently increased their forecasts for worldwide oil demand, helping to reignite supply worries that dogged the market last year.
“The problem that everybody’s looking at is that world production is just not able to keep up with demand and particularly the demand for Asia,” said Michael Armbruster, an energy analyst at Altavest Worldwide Trading in Mission Viejo.
The market also has been wavering over conflicting signals from leaders of the Organization of the Petroleum Exporting Countries, which is set to meet in Iran on March 16 to discuss oil output targets.
On Thursday, markets were surprised by a comment by OPEC’s acting secretary-general that seemed to predict crude prices as high as $80 a barrel.
“I can stress that the probability that the price of a barrel of crude rises to $80 in the near future is a low probability,” Adnan Shihab-Eldin was quoted as saying in a Kuwaiti newspaper. “However, I can’t rule out the rise of a barrel of oil to $80 in the coming two years.”
Later in the day, markets were calmed when OPEC-member Nigeria said the group planned to discuss whether to pump more oil to lower prices.
Some analysts blame the most recent jolt to the oil and gasoline markets on frenzied trading by investment funds and speculators looking for quick profits, rather than companies that are shopping for actual barrels of oil.
Having a big run-up in prices in the face of strong U.S. inventory for crude oil, “is really showing the power of ... the hedge funds,” said Rick Mueller, senior oil analyst at Energy Security Analysis Inc. in Wakefield, Mass. “In a normal market, if you had inventories as high as they are, oil should be down in the low 30s.”
Others were even harsher in their assessment.
“What we’ve got is a runaway market” where hedge funds and speculators are pushing prices around, said Ed Silliere, vice president of risk management at Energy Merchant Corp., a New York-based fuel and oil trader and distributor. “We don’t have the fundamentals to support these prices.”
Reuters was used in compiling this report.
