New York_Oil futures shot to a new record above $100 Tuesday for the first time since Jan. 3 as investors bet that crude prices will keep climbing despite evidence of plentiful supplies and falling demand. At the pump, gas prices rose further above $3 a gallon.
There was no single driver behind oil's sharp price jump; investors seized on an explosion at a 67,000 barrel per day refinery in Texas, the falling dollar, the possibility that OPEC may cut production next month, and continuing tensions between the U.S. and Venezuela.
Gasoline and heating oil prices appeared to be leading the advance, rising faster in percentage terms than oil due to the explosion Monday at Alon USA's Big Spring, Texas, refinery, which could be shuttered for two months.
"The refinery fire in Texas is making people a little concerned," said Michael Lynch, president of Strategic Energy & Economic Research Inc. in Amherst, Mass.
Light, sweet crude for March delivery rose $4.30 to $99.80 a barrel on the New York Mercantile Exchange after earlier rising as high as $100.10, a new record. Final settlement prices weren't available yet. March gasoline jumped 10.17 cents to $2.5955 a gallon, and March heating oil rose 10.81 cents to $2.755 a gallon.
Oil prices are still within the range of inflation-adjusted highs set in early 1980. Depending on how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.
The dollar fell Tuesday, giving investors another reason to buy oil. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.
For the moment, investors appear to have put aside concerns about the economy that have sent oil prices down into the mid-$80 range twice since crude peaked above $100 last month. Traders are instead focused on the Organization of Petroleum Exporting Countries, which will meet early next month to map out production plans, and Venezuela, where President Hugo Chavez made conflicting statements this weekend about the country's legal dispute with Exxon Mobil Corp.
OPEC could move to cut production in the second quarter, typically a period of low demand, though many analysts feel that's unlikely. In Venezuela, Chavez said he was not serious about an earlier threat to cut oil sales to the U.S., but also threatened to sue Exxon Mobil. The world's largest oil company is fighting Venezuela's nationalization of an oil project, and recently convinced several courts to freeze $12 billion in Venezuelan oil assets.
None of the news is enough to justify a nearly $3 a barrel jump in the price of crude, said James Cordier, founder of OptionSellers.com, a Tampa, Fla., trading firm. Echoing other analysts, Cordier argued that the oil market is in the process of "decoupling" from oil's supply and demand fundamentals. He said investors drawn by the falling dollar and momentum are pushing oil prices sharply higher despite reports last week from the Energy Department, OPEC and the International Energy Agency which all cut oil demand growth predictions for this year.
"Everyone concurs that we've got smaller demand coming in the U.S.," Cordier said.
Retail gas prices, meanwhile, jumped 1.8 cents to a national average price of $3.032 a gallon Tuesday, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, are following oil prices higher. The Energy Department expects gas prices to peak near $3.40 a gallon this spring.
Other energy futures also rose Tuesday. March natural gas jumped 32 cents to $8.98 per 1,000 cubic feet. Analysts said prices were supported by forecasts for cooler weather, but that futures were also following oil prices higher.
In London, Brent crude for April delivery rose $3.38 to $98.29 a barrel on the ICE Futures exchange.
AP Business Writers George Jahn in Vienna and Thomas Hogue in Bangkok contributed to this report.John Wilen, AP Business Writer © 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Three women who have previously accused President Donald Trump of sexual harassment are sharing their stories on NBC's "Megyn Kelly Today." Jessica Leeds, Samantha Holvey and Rachel Crooks told of alleged...
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