Oil futures edged toward $80 a barrel Monday, and retail gasoline prices jumped about 2 cents a gallon nationwide and in California.
Promising signs of an economic recovery, a cold snap and unrest in supply centers combined to drive crude oil futures for February delivery to $78.77 a barrel, up 72 cents, on the New York Mercantile Exchange.
Oil has climbed 76% this year so far, and some analysts said it could hit $80 to $85 a barrel before the year closes.
After rising for four days in a row, the price of oil is at a four-week high amid signs of strengthening economic activity. They include a report from SpendingPulse, an information service by MasterCard Advisors, that U.S. retail spending during the holiday season was up 3.6% from a year earlier.
An improving economy means more demand for oil and its products. So does the severe winter weather hitting parts of the country.
Concerns about supply also are boosting prices.
“We have tensions over oil pipeline negotiations between Russia and the Ukraine, and when the pipeline was shut down last year, oil jumped $14 a barrel in just a few days,” said Phil Flynn, an analyst at PFGBest Research in Chicago.
“We could see a quick rise of $5 to $8 a barrel if tensions remain high,” Flynn added.
Russia had warned the European Union that it might cut its crude oil supplies because Ukraine, located between Russia and the EU, was demanding higher fees to transport oil through its territory.
Some of those fears were allayed after the close of trading when Russia and Ukraine announced they had agreed on the terms of a deal governing the transit of oil exports to Europe. Irina Yesipova, a spokeswoman for the Russian energy ministry, said that the deal would be signed in the coming days and that no interruption in supplies was expected.
But another international hot spot seemed likely to make traders jittery through the rest of the week. Iranian authorities Monday intensified their crackdown against a budding opposition movement, just a day after at least eight people were killed during protests.
Adding to the volatility, the last week of every year is typically a low-volume trading affair in which many of the major players sit on the sidelines and those that are left tend to overreact to world events, said Tom Kloza, senior oil analyst for the Oil Price Information Service in New Jersey.
“We’re looking at one-sixth to one-fifth of the normal trading volume this week, and you tend to find a lot of the people who are left are grasping at straws. This looks like it could be a false rally,” he said.
Kloza added that oil and gasoline prices could cool in January as bills for holiday retail purchases dampen enthusiasm and demand. He said Americans usually drive less in January after traveling to see family and friends during the holiday season.
This last week, however, the average cost of a gallon of regular gasoline in California rose for the second straight week, up 2.1 cents to $2.933. Nationally, the average price increased 1.8 cents to $2.607, according to the Energy Department’s weekly survey of service stations.
A year ago, the U.S. average was about a dollar cheaper and the California average was $1.12 cheaper, and oil was trading around $40 a barrel.