Oil Pushed Above $127 A Barrel For First Time

By: AP
By: AP

Oil prices soared more than $3 a barrel, surpassing $127 for the first time Friday and putting more pressure on already lofty gasoline and diesel prices ahead of the summer driving season in the northern hemisphere.

Also pushing oil prices up were speculation that China's demand for diesel needed to fuel its power plants would rise due to reconstruction efforts after this week's earthquakes and an upward revision of an oil price forecast by investment bank Goldman Sachs from $107 to $141 a barrel for the second half of the year.

Light, sweet crude for June delivery on the New York Mercantile Exchange rose as high as $127.82 a barrel in electronic trading by afternoon in Europe, before retreating to $127.55, up from Thursday's close of $124.12.

The previous high for oil was $126.98 a barrel set on Tuesday.

"Everything the market looks at is bullish," said a report by U.S. energy risk management firm Cameron Hanover.

Technical trading, which takes into account on prices patterns and other technical data instead of relying more on fundamentals such as supply and demand, also was seen as a reason for the high prices.

"Unless there is a confluence of substantive bearish news, when there is a pullback of something like $5, it's unlikely to stay down because enough participants will see that as a buying opportunity," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Thursday's expiration of options contracts and a temporary shutdown of ICE Futures trading in crude oil and other futures products due to a power outage also contributed to the previous session's volatility.

"So there was a lot of confusion yesterday, and not surprisingly, there was this wild, seesaw session," Shum said.

Options let investors bet oil prices will rise or fall in the future, and prices can fluctuate widely on days when options expire.

Shum said oil is still seen as a better bet than investors' other options.

"Oil as a class has performed better this year than equities and bonds, and continues to encourage investors to pile money into oil and stay in oil," Shum said.

On Thursday, oil initially climbed in the floor session as U.S. diesel fuel prices jumped 3.6 cents at the pump to a new national average of $4.455 a gallon. Diesel is used to fuel most truck, trains and ships, and is a large part of the reason prices of food and consumer goods are rising so fast.

U.S. retail gas prices, meanwhile, advanced past an average of $3.77 a gallon. At the pump, the national average price of a gallon of regular gas was $3.776 on Thursday, according to a survey of stations by AAA and the Oil Price Information Service. Prices are 67 cents higher than a year ago, and many analysts think they could rise as high as $4 on a national basis in coming weeks. Consumers in many areas are already paying that much, or more.

But as oil reached for new records, the U.S. Energy Department reported that natural gas inventories rose 93 billion cubic feet last week, more than analysts had expected, and that pulled the whole petroleum energy complex lower.

Fluctuations in the dollar have contributed as well to oil's volatility. The dollar has generally been stronger than earlier in the year, but it is waffling between 104 and 105 against the yen, while the euro seems to be range-bound between $1.54 and $1.55.

Investors have been viewing oil and other commodities as a hedge against inflation and a weaker dollar since the middle of last year, and that link has meant that oil has been tending to rise and fall inversely with the dollar.

In other Nymex trading, heating oil futures rose 5.15 cents to $3.6739 a gallon while gasoline prices added 5.64 cents to $3.222 a gallon. Natural gas futures rose 14.9 cents to $11.548 per 1,000 cubic feet.

___

AP Business Writer Thomas Hogue in Bangkok, Thailand, contributed to this report.


Comments are posted from viewers like you and do not always reflect the views of this station.
powered by Disqus
631 SW Commerce Pl. Topeka, Kansas 66615 phone: 785-272-6397 fax: 785-272-1363 email: feedback@wibw.com
Gray Television, Inc. - Copyright © 2002-2014 - Designed by Gray Digital Media - Powered by Clickability 19008254 - wibw.com/a?a=19008254