Oil prices rise above $70 a barrel

Oil prices settled above the psychologically important $70-a-barrel mark Friday for the first time since last August on worries about gasoline supplies in the heart of the summer driving season.

Light, sweet crude for August delivery rose $1.11 to settle at $70.68 a barrel on the New York Mercantile Exchange after rising as high as $71.06 in the session. Oil last closed above $70 a barrel Aug. 31.

At the pump, gas prices continued to defy analyst expectations by falling four-tenths of a cent overnight to a national average price of $2.971 a gallon Friday, according to the American Automobile Assn. Retail gas prices peaked at $3.227 a gallon May 24.

Analysts have predicted for weeks that retail gas prices are bound to stop falling, and could even rise again, as demand picks up during the summer driving season. Demand is especially strong from the Fourth of July holiday to Labor Day.

Crude futures had fallen as low as $67.77 Tuesday, the day before a government report showed that gasoline supplies fell when analysts had been expecting a big build.

That Wednesday report fueled the late-week rally into $70 territory. The discovery of an unexploded car bomb in west London also boosted prices, analysts said.

In the futures markets, prices have risen in recent weeks on concerns that gas supplies are inadequate to meet summer driving demand.

But as refineries finally start ramping up to meet that demand, traders also see demand for crude oil increasing.

The concerns were stoked Wednesday when the Energy Department’s Energy Information Administration reported that gasoline inventories dropped 700,000 barrels in the week ended June 22. Analysts polled by Dow Jones Newswires had expected a 1.1-million-barrel gain.

But the Energy Information Administration also reported a 1.8% increase in refinery utilization, higher than estimates of a gain of 0.8%.

This year an unusual number of refinery outages served as a bottleneck in the gasoline supply system, sending futures prices higher.

At that point, oil followed gasoline higher in sympathy, traders said, even though crude stockpiles neared nine-year highs.

Now, as refineries come back online, oil prices seem less tethered to gasoline futures. Crude stocks are falling, reflecting growing demand for crude by refineries looking to crank out gasoline.