Thursday July 3, 4:50 pm ET
By Adam Schreck, AP Business Writer
Oil surges to new highs above $145 a barrel; US pump prices at record near $4.10 a gallon
For a nation accustomed to hopping in the car or jetting cross-country on what is typically one of the busiest travel weekends of the year, the numbers are sobering:
Last Independence Day, drivers were paying just $2.95 a gallon for gas — about $1.15 less than today.
Oil prices are up more than 50 percent since the start of the year. Prices rose by a similar amount in 2007 — but it took almost the entire year for them to make that trip.
Just this week alone, the cost of a barrel of oil jumped 3.6 percent. And that was a shortened week.
A barrel of light, sweet crude for August delivery now costs a record $145.29 as of Thursday’s settlement price on the New York Mercantile Exchange, up $1.72 from the previous day. Earlier in the session, the contract rose to $145.85 a barrel, also a new high.
Oil has set trading or closing records in each of the last six trading sessions.
“Prices that you once would’ve associated with lunatic fringe are now mainstream,” said Tom Kloza, chief oil analyst at the Oil Price Information Service.
Drivers in about three-quarters of U.S. states are now paying more than $4 for a gallon of gasoline. Nationwide, the average retail price for regular gasoline jumped six-tenths of a penny to $4.098 a gallon, according to AAA, the Oil Prices Information Service and Wright Express.
The latest surge in oil prices was propelled by a midweek report of lower crude stockpiles in the United States, lingering concerns about conflict with Iran and comments by Saudi Arabia’s oil minister suggesting his country would not boost production.
Prices might have raced even higher Thursday were it not for a sharp gain by the dollar against the euro. The greenback strengthened considerably after the European Central Bank raised interest rates by a quarter point as expected but did not signal additional rate hikes that might further boost the 15-nation European currency.
“The strength in crude oil is amazing given the price of the euro,” said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.
A slumping dollar has been a key driver pushing oil prices up by half this year. Many investors buy commodities such as oil as a hedge against inflation when the greenback weakens, and a falling dollar makes oil less expensive to investors overseas. When the dollar strengthens, traders typically have less incentive to buy commodities.
Oil prices are also rising because investors have been pumping more money into the commodity to compensate for what are perceived to be anemic returns elsewhere, analysts say. The major stock market indexes are all down by double digits since the start of the year.
Recent saber-rattling in the Middle East is another reason for this week’s increase. Traders are concerned that a conflict with Iran could disrupt what are already seen as uncomfortably tight global supplies.
“There’s a whole lot of thinking right now that prices haven’t risen high enough to meet demand growth,” Cordier said.
Speaking Thursday in Madrid, Saudi Arabia’s oil minister said the world’s biggest oil exporter had no immediate plans to boost crude output because there was no need to do so.
Ali Naimi said he was “concerned about the (price) level” and suggested Saudi Arabia is ready to raise production if the kingdom determines supply-and-demand fundamentals have changed. But for now, the minister told reporters, “all our buyers are satisfied and happy.”
Traders were also keeping an eye on storms brewing offshore.
A system developing near the Cape Verde Islands off the western coast of Africa was upgraded to become the second tropical storm of the hurricane season, although it was expected to turn northward and avoid the oil and natural gas platforms scattered throughout the Gulf of Mexico.
“It’s more of a psychological thing,” Cordier said. “It reminds traders that hurricane season is ahead of us, not behind us.”
In other Nymex trading, heating oil futures rose 3.45 cents to settle at $4.106 a gallon, while gasoline futures added 2.16 cents to settle at $3.571 a gallon. Natural gas futures jumped 18.8 cents to settle at $13.584 per 1,000 cubic feet.
In London, Brent crude futures rose to a trading record of $146.69 a barrel on the ICE Futures exchange before settling at $146.08, up $1.82.
AP writer George Jahn in Madrid, Spain, contributed to this report.