Oil prices surge while gas drops
Oil prices jumped more than $2 a barrel Monday in the commodity’s biggest surge in six weeks. A weak dollar, encouraging news about U.S. consumer spending, and fears about a terrorist bombing in Moscow were cited by analysts, who said that the market could soon top $90 a barrel.
But retail gasoline prices fell nationally and in California at a time of year when they are usually on the rise.
The average retail price for a gallon of regular gasoline in California edged lower by four-tenths of a penny to $3.087 in the week ended Monday, according to the Energy Department’s weekly survey of filling stations. Nationally, the average fell 2.1 cents to $2.798, even though much of the U.S. was switching to more expensive summer fuel blends.
Oil’s strong showing came despite plentiful supplies.
“This is about crowd behavior, money flow and typical seasonal adjustments,” said Tom Kloza, chief oil analyst for the Oil Price Information Service. “Investments continue to pour in because oil has become an incredibly attractive asset class.”
Light, sweet crude for May delivery rose $2.17, or 2.7%, to $82.17 a barrel on the New York Mercantile Exchange.
The suicide bombings on the Moscow subway that killed at least 38 people had a limited effect on oil, analysts said, because fear over world events already was reflected in the commodity’s price.
Mostly, oil trading reflected encouragement about the U.S. and world economies, analysts said.
The Commerce Department said Monday that consumer spending in the U.S. in February rose for the fifth consecutive month. The Labor Department will release an employment report Friday that is expected to show that employers added jobs for only the second time since December 2007.
What’s more, the euro was stronger in relation to the dollar, based on easing concerns about an economic collapse in Greece, and whenever the dollar is weak, oil becomes a more attractive investment, said Phil Flynn, an analyst with PFGBest Research.
Some of the world’s smaller, emerging economies were also strengthening, Kloza said, and were expected to absorb some of the world’s oil glut.
But some analysts were skeptical that oil prices would rise much, citing other trends that might drive petroleum supplies higher.
Fadel Gheit, senior energy analyst for Oppenheimer & Co., said in a note to investors that technological advancements in drilling “have significantly reduced drilling time and unit cost and boosted production rates.” But, he said, the same developments “have also increased supply,” which should depress prices.
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