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High oil prices persist over Mideast fears; analysts watch warily

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Times Staff Writer

U.S. oil prices on Monday remained nearly $10 a barrel above last year’s record average for the commodity, leading at least one analyst to suggest that $105 crude may become “the new normal” unless fears about Mideast turmoil begin to ease.

Crude oil futures were up 4 cents on the New York Mercantile Exchange to $106.91 a barrel. In 2011, oil prices on the NYMEX averaged more than $97 a barrel for the first time ever, according to Energy Department statistics.

“At the end of the day, we have one heckuva Iran premium built into the current price for oil,” said Phil Flynn, an oil analyst for PFGBest Research who made “the new normal” comment, referring to continuing fears over Iran’s nuclear power development. “Assuming nothing else goes wrong in the Middle East, we’re near the top, but that is a big if.”

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Another expert, Oppenheimer and Co.'s senior energy analyst, Fadel Gheit, sent a note to investors on potential earnings for the industry. His figures were based on the possibility that U.S. oil prices would average $105.74 a barrel.

Gheit said that oil prices were inflated and should be no higher than $80 to $85 a barrel given the low demand for the commodity in the midst of a slow U.S. economic recovery, widespread debt problems in a floundering Europe and a slowdown in growth in China.

“The market has built up prices over the risk of a shooting war involving Iran,” Gheit said. “The region is already a tinderbox.”

Where oil goes from here “all depends on whether Israel decides to attack the Iranian nuclear installations,” said fuel price specialist Bob van der Valk. The price will go even higher, he said, “if bombs start falling on Iran.”

The cost of the oil that the U.S. imports is based on the European benchmark for commodities trading, Brent North Sea oil. On the ICE Futures Europe Exchange in London, Brent oil was up 49 cents to $125.62 a barrel.

In the U.S., those numbers were again forcing up the average retail price for a gallon of regular gasoline. The U.S. average reached $3.897 a gallon, up another 5.5 cents since last week, according to the AAA Fuel Gauge Report.

In California, the average was dropping, but not enough for it to matter much after a fill-up. The California average of $4.331 a gallon was a slight drop of 1.9 cents since the previous week.

The record gasoline prices for March had some analysts reconsidering their predictions for 2012.

“We’re 31 cents per gallon ahead of our year ago pace,” said Patrick DeHaan, senior petroleum analyst for GasBuddy.com. “I’m seriously contemplating revising my forecasts upward, having seen things race higher, faster than expected. If there’s any ounce of good news for motorists, its that such high prices so quickly may mean prices will peak in April rather than May.”

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