May 12, 2008 12:04 pm US/Central
Oil Prices Set Another Record, Above $126
NEW YORK (AP) ―
Oil prices briefly spiked to a new record above $126 a barrel Monday but later wobbled with some investors buying on worries of falling supply and others selling in response to a stronger dollar.
Retail gas prices, meanwhile, rose to another record above $3.70 a gallon, again following crude's recent path higher.
Oil futures have set new records for six straight sessions, driven up by a weak U.S. dollar and growing concerns about declining crude production in Mexico, Russia and elsewhere, analysts say. Goldman Sachs said in a report last week that crude prices could rise to $150 to $200 within two years.
"What's really circulating now is the possibility that world oil production has peaked. There's an idea that we can't change supply but we can change demand, and the only way to do that is to rally the market higher," said James Cordier, founder of OptionSellers.com, a Tampa, Fla., trading firm.
Light, sweet crude for June delivery jumped to a new record of $126.40 a barrel on the New York Mercantile Exchange before falling back to $125.35, down 61 cents. The contract first rose above $126 on Friday.
A slightly stronger dollar gave investors reasons to sell crude Monday. A stronger greenback makes commodities such as oil less attractive to investors as a hedge against inflation, and it makes oil more expensive to investors overseas.
Also pressuring oil slightly were concerns that a massive earthquake Monday in central China may temporarily slow demand. The 7.8-magnitude quake killed more than 7,600 people, toppled buildings and knocked out power lines.
"We know that some power and electricity plants are off-line, so that could have a negative impact on demand," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago. "But obviously the market is still showing strength so it has a lot of bounce in it."
Oil's surge is pushing retail gas prices higher. The national average price of a gallon of regular gas rose 1.1 cents overnight to a record $3.718 a gallon according to a survey of stations by AAA and the Oil Price Information Service. The Energy Department expects prices to peak at a monthly average of $3.73 in June, though many analysts say national average prices could rise as high as $4. Consumers in many regions, including parts of California and Hawaii, are already paying that much.
Demand for diesel fuel is also growing worldwide, but supplies of distillates, which include diesel and heating oil, fell unexpectedly earlier this month. That's pushing U.S. diesel prices to record highs and inflating heating oil prices in the futures market; heating oil futures are often viewed as a proxy for diesel.
Heating oil for June delivery fell 2.9 cents to $3.6070 on the Nymex. But at truck stops, retail diesel prices rose 3.1 cents overnight to a record national average of $4.361 a gallon,
Diesel is used to move most of the world's food, consumer and industrial goods via truck, ship and rail. Skyrocketing diesel prices are part of the reason food and consumer goods prices are so high.
In other Nymex trading Monday, June gasoline futures fell 0.68 cent to $3.1944 a gallon.
In London, June Brent crude futures fell 50 cents to $124.90 a barrel on the ICE Futures Exchange.
(© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
CBS News Interactive: Gas Prices
Click to enlarge
Stumble It!
