Oil Prices Skyrocket to New Record
NEW YORK – Oil prices shot to a new record above $144 a barrel Wednesday as the government reported a bigger-than-expected drop in U.S. supplies and the threat of conflict with Iran weighed on traders’ minds.
The latest spike means a barrel of crude has gone up by about half since the end of last year, when oil was going for $96 a barrel. Retail gasoline prices climbed to a record of their own in the U.S.
Light, sweet crude for August delivery rose as high as $144.32 on the New York Mercantile Exchange shortly after the regular trading session ended. The contract also notched a new closing record, settling at $143.57 – a full $2.60 above the previous high from a day earlier.
Oil first traded above $100 a barrel in January. It hit the previous trading high of $143.67 on June 27.
The Energy Department’s Energy Information Adminis-tration said crude oil supplies fell by 2 million barrels last week, or about 800,000 barrels more than analysts surveyed by the energy research firm Platts predicted.
However, the report offered a mixed picture of energy use by the world’s thirstiest oil consumer. Gasoline supplies unexpectedly grew by a considerable amount, and demand continued to slide – suggesting that record fuel prices are prompting a real shift in Americans’ driving habits.
Even so, gas prices continue to rise along with the soaring cost of oil. Prices at the pump jumped half a penny to a new national record of $4.092 a gallon on average, according to AAA, the Oil Price Information Service and Wright Express.
The inventory report was only one factor in Wednesday’s rally, which came a day before investors left for a three-day weekend. U.S. oil markets are closed Friday for July Fourth.
“It’s a combination of things,” Phil Flynn, an analyst at Alaron Trading Corp. in Chicago, said of the run-up. “People are buying oil because they’re worried about tight supplies, the weak dollar, war breaking out in Iran. It doesn’t look like any of this stuff is going to settle down any time soon.”
Ongoing rhetoric about possible attacks on Iran, the world’s fourth-largest oil producer and OPEC’s second-largest exporter, left the market jittery.
Traders are worried Tehran could try to halt shipments and seize control of the strategically important Strait of Hormuz if attacked by Israel or the U.S. About 40 percent of the world’s tanker traffic passes through the Middle Eastern choke-point.
Iran’s oil minister warned Wednesday that an attack on his country would provoke a fierce response, but said Tehran would not cut oil deliveries and would continue supplying the market even if struck.
A senior U.S. military commander vowed to ensure that the strait remains open.
“We will not allow Iran to close it,” Vice Adm. Kevin Cosgriff, the commander of the 5th Fleet, told reporters after talks with naval commanders of Persian Gulf countries in the United Arab Emirates capital of Abu Dhabi. The 5th Fleet is based in Bahrain, across the Persian Gulf from Iran.
The saber-rattling has left energy traders on edge as they try to ascertain the likelihood of a Middle East flare-up and the effect it could have on the world’s already tight supply of oil.
“When you start hearing these type of stories as an oil trader, it’s hard to dismiss them,” Mr. Flynn said.
Originally published by Associated Press.
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