Oil prices hit 6-month high
Crude oil prices surged above $66 a barrel Thursday, driven to a six-month high by concerns that strained relations between Iran and the West could put oil exports in jeopardy as U.S. gasoline supplies waned and demand swelled.
Pump prices kept rising as well: The average U.S. retail price of regular gasoline was $2.62 a gallon Thursday, 12 cents higher than a year earlier, according to AAA.
Californians are seeing the highest prices in the country, with gas stations charging an average of $3.216 a gallon for regular gasoline, AAA data showed.
Tom Kloza of the Oil Price Information Service in Wall, N.J., said that it was normal for West Coast prices to be higher than the rest of the country, but that the disparity was wider than usual, largely because California had seen more refinery downtime than other states.
Last week, Iran detained 15 British navy personnel, and Thursday the country suspended the release of a female British sailor. A top official said the captives might be put on trial. The incident comes several months into a standoff between Iran, the fourth-largest oil producer, and the U.N. over the country’s nuclear program.
Worries related to Iran have led traders to put an extra premium on oil prices, which are already high because of seven straight weeks of declines in U.S. gasoline inventories.
Traders aren’t saying they believe that war with Iran is likely, but in an environment of high demand and falling domestic supplies, they think the effects of a large-scale conflict on the energy markets could be huge.
Iran is positioned along the Strait of Hormuz, through which tankers ship about 17 million barrels of crude oil a day, according to the Energy Information Administration. That accounts for two-fifths of the world’s crude oil moved by tanker and about one-fifth of total oil production. The exports exiting the narrow waterway are bound for the U.S., Western Europe and Japan.
“We’re in a short-term business. If oil were to stop flowing there for a period of time, fear will run rampant and oil will be in the 70s immediately,” said James Cordier, president of Liberty Trading Group in Tampa, Fla.
Light, sweet crude futures for May delivery soared $1.95 to settle at $66.03 a barrel on the New York Mercantile Exchange, after rising as high as $66.50. It was the highest settlement price since Sept. 8, when crude finished at $66.25, but still far off the record high of $78.40 reached during intraday trading in mid-July.
Cordier estimated that concerns related to Iran were adding about $3 to $4 to the price of crude right now, and that supply disruption in the Strait of Hormuz would add an additional $4 to $5.
Gasoline futures climbed 7.83 cents to settle at $2.136 a gallon.
U.S. inventories of gasoline remain in the upper half of the typical range for this time of year, but U.S. gasoline demand averaged 9.2 million barrels a day over the last four weeks, up 1.6% from the same period last year, the Energy Information Administration said Wednesday. Wachovia economist Jason Schenker pointed out that these demand levels weren’t seen last year until May.
Schenker said that the average U.S. pump price was the highest it had ever been for March and could reach a range of $2.75 to $3.35 a gallon by the summer. The highest recorded national average was $3.057 in September 2005, according to AAA, after Hurricane Katrina hit the Gulf Coast.
