- The Washington Times - Thursday, April 2, 2009

NEW YORK (AP) - Oil prices surged nearly 8 percent Thursday as investors shrugged off a jump in unemployment and focused instead on a weaker dollar, rising stock markets and the hope that the U.S. economy has finally bottomed out.

Meanwhile, natural gas prices rose even though a government report said U.S. inventories were unchanged since last week and remain well above historical levels.

Both commodities are key for the American economy. A change in crude prices affects everything from how much it costs to fill up at the gas pump to the cost of making golf balls, shampoo and thousands of other petroleum-based products. Natural gas is used around the country to make electricity, and a change in prices affects how much power companies want to charge rate payers.

Benchmark crude for May delivery rose $3.72 to $52.11 a barrel on the New York Mercantile Exchange. Prices rose as high as $52.50 earlier in the day.

In London, Brent prices gained $3.94 at $52.38 a barrel on the ICE Futures exchange.

“We’re getting a bounce today, but I’m not sure if it will go much higher,” said Peter Beutel, oil analyst at Cameron Hanover. “The market has a lot of reasonably negative factors going into it.”

A massive surplus of crude has kept prices low this year, and government reports said that U.S. storage houses are only getting more bloated. They’re now brimming with more oil than they’ve had in 16 years as manufacturers shutter factories and millions of laid off workers stay home.

On Thursday, the Labor Department said unemployment levels are the highest in more than 26 years. Initial claims for unemployment insurance unexpectedly rose to a seasonally adjusted 669,000 from the previous week’s revised figure of 657,000.

The Energy Department’s Energy Information Administration also reported Thursday that natural gas inventories held in underground storage in the lower 48 states stayed at 1.65 trillion cubic feet for the week ended March 27.

That’s 32.1 percent above the inventory level from a year ago and 22.4 percent above the five-year average, according to the government data.

Despite the unemployment report, investors pumped money into oil. Besides the stock market, a weaker dollar helped boost crude prices since oil is traded in U.S. currency and foreign investors can buy more when the dollar drops.

The 16-nation euro jumped to $1.3431, and the British pound rose to $1.4666 from $1.4447. But the dollar gained against the Japanese yen, rising to 99.33 from 98.65 yen.

Crude prices aren’t moving because of supply or demand, but because of “the perceived imbalance in the U.S. and European economies,” Alaron Trading Corp. analyst Phil Flynn said.

“Seems like the world now is running to the EU as a safe haven, and it makes the dollar much weaker, and commodities that are priced in dollars are moving much higher today,” he said.

The Commerce Department also said orders for manufactured goods increased 1.8 percent in February. That’s much higher than analysts expected and it reversed six straight monthly declines.

Many analysts expect tighter supplies in the future as companies cut back on developing new sources of oil and OPEC makes good on promises to slash production.

The Organization of the Petroleum Exporting Countries has pledged to reduce output quotas by 4.2 million barrels a day in hopes of artificially boosting prices. Analysts say the group hasn’t completed its goal, but they’ve noticed a sharp drop in crude flowing out of OPEC countries.

Tanker tracker Oil Movements said Thursday that OPEC’s crude shipments are expected to drop another 960,000 barrels per day for the four-week period to April 18.

Elsewhere, oil companies and Gulf state ministers warn that the plunge in crude prices has forced them to reduce investment in new production.

“If prices stay low for a long time future supply growth will be impossible, leading to another price run-up in the future,” Qatar Energy Minister Abdulla bin Hamad al-Attiyah told an oil industry conference in Paris.

Al-Attiyah said crude prices “must rise to a level that supports investment,” and said that in his opinion, $50 a barrel “is the pragmatic price.”

France’s largest company said it may not achieve its target of investing euro18 billion ($23.84 billion) this year. Total SA Chief Executive Christophe de Margerie said some projects are likely to be “slightly delayed.”

“Definitely this crisis will leave strong traces in the long term and we will probably not see the same world anymore,” he said.

At the pump, gas prices changed little overnight, dropping 0.2 cents to a new national average of $2.045 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Gas is 11.2 cents a gallon more expensive than last month, but $1.242 a gallon cheaper than last year.

In other Nymex trading, gasoline for May delivery rose 8.91 cents to $1.4608 a gallon and heating oil gained 8.23 cents to $1.4281 a gallon. Natural gas for May delivery added 13.5 cents at $3.830 per 1,000 cubic feet.

___

Associated Press writers Ernest Scheyder in New York, Pablo Gorondi in Budapest, Hungary, and Alex Kennedy in Singapore contributed to this report.

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