Oil settles above $112 as dollar falls

Story Topics
Question of the Day

Should Congress make English the official language of the U.S.?

View results

NEW YORK (AP) — Oil surged above $112 per barrel Friday following a drop in the dollar and continued jitters about shipments from the world’s major oil suppliers.

Benchmark West Texas Intermediate crude oil for May delivery jumped $2.49, or 2.3 percent, to settle at $112.79 per barrel on the New York Mercantile Exchange. Crude oil set new 30-month highs almost every day this week.

Oil moved higher as the dollar plunged against other major currencies. Oil is traded in dollars and tends to rise when the greenback falls and makes crude cheaper for investors holding foreign currency. The looming shutdown of the federal government threatened to weaken the dollar further and encouraged more buying, according to analysts.

Oil also climbed on fears that violence in Nigeria ahead of the country’s national election this weekend could lead to supply interruptions. And in Venezuela a massive blackout appears to have affected some refineries, analysts said. The two countries supply a combined 2 million barrels of oil per day to the U.S.

If crude prices keep rising, experts say, gasoline prices could hit $4 a gallon across the U.S. this summer.

Pump prices have jumped from $3.07 to $3.74 per gallon since the beginning of the year. The swift rise forced the Oil Price Information Service to boost its retail gasoline price forecast to a range of $3.75 to $4 per gallon this year. OPIS chief oil analyst Tom Kloza said it may not be long before the national average tests the all-time record of $4.11 per gallon set in July 2008.

Further price hikes could do serious damage to the U.S. economy, he said. For consumers, “gas prices have more relevance on an emotional level than a lot of other things that they pay for,” Kloza said. “People pay more attention to gasoline than phone service, cable TV or other services,” Kloza said.

The national average for a gallon of gas is now 88.3 cents higher than the same time last year, according to OPIS, AAA, and Wright Express. It’s already above $4 per gallon in California, Alaska and Hawaii, and it’s almost there in Connecticut, Washington, D.C., Illinois and New York.

Oil and gasoline prices began a steady rise in February, as the Libyan rebellion shut down the country’s daily exports of 1.5 million barrels of oil. Libya produces about 2 percent of world demand, and analysts say making up for those losses will severely reduce the ability of other oil-producing countries to increase production in the future. Saudi Arabia and other OPEC countries are covering some of the shortfall in Libyan crude, which went mainly to refineries in Europe.

Barclays Capital has said that Libya’s oil exports probably will be offline for several months. As fighting continues more traders are going along with that prediction.

“The market is being forced to consider a possible major loss of Libyan barrels probably through the rest of this year and into next,” analyst Jim Ritterbusch said Friday.

Experts point to other factors that have pushed oil and gasoline to record levels. The U.S. economy added hundreds of thousands of jobs this year. That means gasoline demand could increase this year as more workers join the daily commute. And last month’s devastating earthquake and tsunami in Japan put further pressure on oil prices. Japan is expected to boost oil and natural gas imports while some of its nuclear power plants are offline.

In other Nymex trading for May contracts, heating oil added 11.37 cents to settle at $3.3197 per gallon and gasoline futures gained 7.42 cents to settle at $3.2607 per gallon. Natural gas lost 1.6 cents to settle at $4.041 per 1,000 cubic feet.

In London, Brent crude rose $3.86 to settle at $126.12 on the ICE Futures exchange.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Comments
blog comments powered by Disqus
TWT Video Picks